Filed 8/2/17 Kalo v. Alam 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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


GEORGE E. KALO, as Trustee, etc., et al.,

Plaintiffs and Respondents,

v.

AHMAD TAREK RASHID ALAM,

Defendant and Appellant.


G053377

(Super. Ct. No. 30-2013-00648688)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Frederick P. Aguirre, Judge. Affirmed.
Allione & Associates and Paul R. Allione for Defendant and Appellant.
Affeld Grivakes, David W. Affeld and Peter Shimamoto for Plaintiffs and Respondents.
* * *
Defendant Ahmad Tarek Rashid Alam, a real estate agent, appeals from the judgment confirming the arbitration award in favor of plaintiffs George E. Kalo and Rimonda Kalo, as individuals and as trustees of the George E. Kalo and Rimonda Kalo Revocable Living Trust (collectively, Kalo). The arbitrator found that although Alam canceled the written listing agreement between him and Kalo for the sale of real property shortly after signing it, he “orally and by conduct led . . . Kalo to believe he would help him sell the property and would represent him as his agent,” thereby creating an oral listing agreement.
Alam contends the arbitrator exceeded his power by finding the existence of the oral listing agreement because such an agreement was legally invalid, controverted by the evidence, was not an issue submitted to arbitration by the parties, and was a remaking of the contract between the parties. He further argues that, assuming an oral listing agreement existed, there was no evidence it contained an agreement to arbitrate and the applicable statute of limitations barred a cause of action for breach of the oral listing agreement. We reject these contentions and affirm the judgment.
Alam also objects to, and moves to strike, the portions of the respondent’s appendix filed by Kalo containing excerpts from three depositions on the basis they “were never admitted, refused, nor lodged with the trial court” in violation of California Rules of Court, rule 8.122(a)(3). But that rule is inapplicable because it pertains to designation of the clerk’s transcript whereas Alam has elected to proceed via appendix under rule 8.124. Alam maintains Kalo should have served and filed a respondent’s designation of record under rule 8.130 had he wanted those deposition transcripts to be included in the record as part of the clerk’s transcript. He is again mistaken. Although rule 8.124(b)(3)(B) states, “An appendix must not: . . . Contain transcripts of oral proceedings that may be designated under rule 8.130” as part of the reporter’s transcript, the record shows the deposition excerpts “were introduced via videotape during the arbitration hearing” and not transcribed. They therefore did not qualify as transcripts required to be excluded under rule 8.124(b)(3)(B). Alam’s objection is overruled and his motion to strike is denied.
I
FACTS AND PROCEEDINGS
On November 1, 2010, the parties entered a written listing agreement in which Alam agreed to represent Kalo as his agent in the sale of commercial property (property) in San Bernardino. Alam canceled the agreement a few days later, after viewing the property and finding it to be in a dilapidated and inferior condition.
Sometime later, Kalo asked Alam for help selling the property and Alam led Kalo to believe, by his words and conduct, he would do so and represent him as an agent. In December 2010, Alam listed the property for $1.6 million on Loopnet, a commercial Web site advertising primarily commercial real estate, to look for potential buyers under the Employment-Based Immigration Fifth Preference (EB-5) program. Later that month, Alam sent the Loopnet listing to Yvonne Ryono, an “EB-5 looker” with whom he had previously worked.
In late February 2011, Ryono told Alam about potential Chinese investors and assured him he would obtain a large profit upon reselling the property to them. A few days later, Alam offered to purchase the property from Kalo for $980,000, which Kalo accepted. The parties later modified the purchase agreement to change the name of the buyer from Alam’s company to Alam as an individual. All other terms remained the same.
In April, while the proceeds from the sale of the property from Kalo to Alam remained in escrow, Alam entered a purchase agreement to “sell the same property he was purchasing from Kalo to a group of Chinese investor/immigrants.” Escrow closed on the sale of the property from Kalo to Alam in June 2011 at the amended price of $1,025,000, while escrow closed on the resale of the property to the Chinese investor/immigrants less than one month later.
The arbitrator found “Alam disclosed to Kalo that the property would be promptly resold but failed to disclose that Alam would make a huge profit in reselling the property.” And Kalo testified that had he known Alam would be making such a large profit, he would not have signed the purchase agreement.
On May 8, 2013, Kalo sued Alam and other entities for breach of contract (listing agreement), fraud, breach of fiduciary duty. Alam moved to compel arbitration citing arbitration provisions in the listing agreement, the purchase agreement and the modification of the purchase agreement (purchase/modification agreement). The court granted the motion and appointed Judge Francisco Firmat (Ret.) to act as the arbitrator.
After the arbitration hearing and briefing by the parties, the arbitrator issued his final award. The arbitrator framed the key question as being “whether or not Alam was Kalo’s real estate agent and owed him a fiduciary duty. It is clear from the facts that Alam purchased Kalo’s property and while that transaction was still in escrow, he entered into an agreement to re-sell the same property at a substantial profit. Alam disclosed to Kalo that the property would be promptly resold but failed to disclose that Alam would make a huge profit in reselling the property. The issue in this case is whether Kalo is entitled to those undisclosed profits based on the (disputed) agency relationship between Kalo and Alam and the fiduciary duties that arose from that relationship.”
The arbitrator answered in the affirmative. Although he found the written listing agreement had been canceled after Alam viewed the property, he concluded “Alam orally and by conduct led . . . Kalo to believe that he would help him sell the property and would represent him as his agent.” “The existence of an oral real estate marketing agreement between . . . Kalo and . . . Alam . . . creates fiduciary duties. Alam cannot engage in self-dealing without making full disclosures. . . . Alam led Kalo to believe he would be acting as his agent to help him first market the property and later agreed to buy the property from him. He engaged in self-dealing when he offered to pay $980,000 (increased later to $1,025,000) to Kalo while at the same time having assurances from . . . Ryono that the resale of the property would probably close escrow in the amount of $1,600,000! Kalo is entitled to recover Alam’s profits for breach of fiduciary duty on a constructive trust theory.”
Kalo petitioned to confirm the arbitration award. Alam responded and requested the award be vacated. The trial court granted Kalo’s petition to confirm the arbitration award, which, as written, became the judgment of the court, and denied Alam’s motion to vacate. Alam timely appealed.
II
DISCUSSION
A. Waiver
Kalo contends Alam waived all arguments on appeal that are based on the premise the arbitrator exceeded his authority in finding an oral agreement between them by failing to raise them before the arbitrator. Alam replies, inter alia, that he challenged the oral agreement in his postarbitration briefs. Upon reviewing those briefs, we conclude Alam sufficiently preserved the claims for appeal.
Kalo also argues Alam waived his contention any listing agreement with a nonbroker is illegal and unenforceable. Alam’s reply brief does not address this contention. Nor did he raise the issue in his postarbitration briefs, thereby waiving it for purposes of any subsequent judicial review. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 31 (Moncharsh).) Even had he preserved the issue for our review, Alam’s contention is unavailing on the merits, as discussed infra.
We reject Alam’s claim Kalo “failed to raise the ‘waiver’ argument with the trial court” in response to his motion to vacate the arbitration award and thus “‘waived’ that argument” on appeal. “It is the appellant’s burden to demonstrate the existence of reversible error” (Del Real v. City of Riverside (2002) 95 Cal.App.4th 761, 766), not the respondent’s burden to anticipate and counter at the trial court level what an appellant might argue on appeal.

B. Standard of Review
“[I]t is the general rule that, ‘The merits of the controversy between the parties [to a private arbitration agreement] are not subject to judicial review.’ [Citations.] More specifically, courts will not review the validity of the arbitrator’s reasoning. [Citations.] Further, a court may not review the sufficiency of the evidence supporting an arbitrator’s award. [Citations.] [¶] Thus, it is the general rule that, with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors of fact or law.” (Moncharsh, supra, 3 Cal.4th at p. 11.)
Code of Civil Procedure section 1286.2, subdivision (a), sets forth the exclusive grounds for vacating an arbitration award. Alam sought to vacate the arbitrator’s award under section 1286.2, subdivision (a)(4), which provides that the court “shall vacate the award” if it determines that “[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.” “Under section 1286.2, subdivision (a)(4), an arbitrator exceeds his powers by acting without subject matter jurisdiction, deciding an issue that was not submitted to arbitration, arbitrarily remaking the contract, upholding an illegal contract, issuing an award that violates a well-defined public policy or a statutory right, fashioning a remedy that is not rationally related to the contract, or selecting a remedy not authorized by law.” (Gravillis v. Coldwell Banker Residential Brokerage Co. (2010) 182 Cal.App.4th 503, 511.) At the same time, an arbitrator does not exceed his or her powers “merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators.” (Moshonov v. Walsh (2000) 22 Cal.4th 771, 775 (Moshonov).)
We review de novo the trial court’s order confirming the arbitration award. (Advanced Micro Devices, supra, 9 Cal.4th at p. 376, fn. 9.) Our focus on appeal is the trial court’s decision, not the arbitrator’s. (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 55.)

C. Legal Error
Alam contends the arbitrator’s finding of an oral listing agreement between him and Kalo is “invalid as a matter of law as such an agreement requires a broker, not an agent” such as himself and because the statute of frauds, in particular Civil Code section 1624, subdivision (a)(4), requires listing agreements to be in writing. These legal claims are unreviewable.
“[S]tatutory grounds for correction and vacation of arbitration awards do not ordinarily include errors of law, [but] contractual limitations on the arbitrators’ powers can alter the usual scope of review.” (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1356 (DirecTV).) Although an “expanded scope of review would be available under a clause specifically tailored for that purpose” (id. at p. 1345), “to take themselves out of the general rule that the merits of the award are not subject to judicial review, the parties must clearly agree that legal errors are an excess of arbitral authority that is reviewable by the courts.” (Id. at p. 1361.)
The arbitration provision in DirecTV read: “‘The arbitrators shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error.’” (DirecTV, supra, 44 Cal.4th at p. 1361, fn. 20.) The Supreme Court concluded the first clause “deprive[d] the arbitrators of the power to commit legal error” and the second clause “specifically provided for judicial review of such error.” (Id. at p. 1361, fn. omitted.) It did not decide “whether one or the other of these clauses alone, or some different formulation, would be sufficient to confer an expanded scope of review.” (Ibid.) But the court “emphasize[d] that parties seeking to allow judicial review of the merits, and to avoid an additional dispute over the scope of review, would be well advised to provide for that review explicitly and unambiguously.” (Ibid.)
Here, Alam petitioned to compel arbitration based on arbitration in the listing agreement and purchase/modification agreement. The arbitration clause in the listing agreement provides that “[t]he arbitrator shall be a retired judge or justice, or an attorney with at least five years of real estate transactional law experience, unless the parties mutually agree to a different arbitrator, who shall render an award in accordance with substantive California Law.” (Original bolding omitted, italics added.) Construing identical language, this court has held such “language provides no hint the parties contemplated appellate review of the merits. True, the final clause specifies ‘substantive California Law’ is to govern the arbitration, but the language and its context, a standard form real estate contract, suggest a routine identification of forum law. . . . The language here, appended in a trailing clause, simply does not convey that the parties resolved to contravene the ‘general rule’ of arbitral finality [citation] by subjecting each other to the time and expense of further court proceedings and the arbitrator to appellate policing.” (Christensen v. Smith (2009) 171 Cal.App.4th 931, 936-937 (Christensen).)
We explained: “Unlike the arbitration agreement in DirecTV, the terms here do not expressly deprive the arbitrator of the power to commit legal error. As the Supreme Court observed in DirecTV, ‘A provision requiring arbitrators to apply the law leaves open the possibility that they are empowered to apply it “wrongly as well as rightly.”’ [Citation.] After all, ‘“‘“[t]he arbitrator’s resolution of these issues is what the parties bargained for in the arbitration agreement.”’ [Citations.]”’ [Citation.] DirecTV cautioned parties to ‘expressly provide for an expanded scope of review’ to distinguish their agreement from ‘the usual expectations of parties to arbitration agreements, who accept the risk of legal error in exchange for the benefits of a quick, inexpensive, and conclusive resolution.’ [Citation.] Because the parties did not do so, there is no basis for the expanded appellate review the Christensens now seek.” (Christensen, supra, 171 Cal.App.4th at p. 937; see Gravillis v. Coldwell Banker Residential Brokerage Co., supra, 182 Cal.App.4th at p. 518 [“the parties in this case did not agree to an expanded scope of review by merely requiring the arbitrator to render an award in accordance with California substantive law”].)
The arbitration provision in the purchase/modification agreement provides even less of a hint the parties contemplated appellate review of legal errors. It states: “[t]he 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 [(FAA)].” (Italics added.) The italicized language provides an additional ground for concluding no basis exists for reviewing Alam’s legal claims. As Christensen explained, “The FAA, unlike the California Arbitration Act (CAA) as construed in DirecTV, does not permit parties to contract for judicial review for legal error. Accordingly, we do not interpret the agreement to mean the parties intended the expanded review the Christensens now advocate. [Citations.]” (Christensen, supra, 171 Cal.App.4th at pp. 937-938.)
Even if reviewable, courts have held that “an oral agreement authorizing someone to act as an agent and find a buyer for the principal’s property and under which the agent received confidential information respecting the property is sufficient to create a fiduciary relationship between the parties. [Citation.] Although Civil Code section 1624, the statute of frauds, is applicable to the collection of compensation or commission by the agent or broker, it does not apply to a cause of action to recover from fiduciary commissions or secret profits. [Citation.]” (Gann v. Williams Brothers Realty, Inc. (1991) 231 Cal.App.3d 1698, 1705-1706; see Beeler v. West American Finance Co. (1962) 201 Cal.App.2d 702, 705 [“Although there was no written contract between plaintiff and the defendant Samuels, the oral agreement whereby Samuels was authorized to act as plaintiff’s agent and to find a buyer for plaintiff’s property, and under which Samuels received confidential information respecting the property is sufficient to create a fiduciary relationship between the parties”].) Alam’s claims of legal error fail for this additional reason.

D. Factual Error
Alam argues the arbitrator exceeded his powers in finding an oral listing agreement because parties agreed no oral agreement existed. He notes the purchase agreement contained an integration clause providing, “All understandings between the parties are incorporated in this Agreement. Its terms are intended by the parties as a final, complete and exclusive expression of their Agreement with respect to its subject matter and may not be contradicted by evidence of any prior agreement or contemporaneous oral agreement.” (Original bolding, underlining and italics omitted.) Additionally, both Kalo and Alam initialed the scratched out places where the purchase agreement identified Alam as an agent to the transaction.
We are not persuaded. As with legal error, claims of factual error are not reviewable on appeal (Moncharsh, supra, 3 Cal.4th at p. 11) and the arbitrator did not exceed his power even if he made a factual error because we conclude, infra, the oral agreement issue was within the scope of the controversy submitted to him (Moshonov, supra, 22 Cal.4th at p. 775).
The cases cited by Alam are inapposite. Tahoe National Bank v. Phillips (1971) 4 Cal.3d 11, In re Estate of Gaines (1940) 15 Cal.2d 255 and Hot Rods, LLC v. Northrop Grumman Systems Corp. (2015) 242 Cal.App.4th 1166 did not involve an appeal from a judgment confirming an arbitration award.
Bonshire v. Thompson (1997) 52 Cal.App.4th 803, 805-806, cited by Alam in his reply brief, is also distinguishable because it involved an arbitration clause specifically prohibiting the arbitrator from considering extrinsic evidence. The integration clause here did not.

E. Scope of Arbitration
Alam also asserts the finding of an oral listing agreement exceeded the arbitrator’s powers because it was not an issue submitted for arbitration by the parties. Among other things, Kalo’s complaint alleged causes of action for breach of fiduciary duty against Alam. “[I]t is for the arbitrators to determine what issues are ‘necessary’ to the ultimate decision [of whether Alam breached fiduciary duties owed to Kalo]. . . . ‘Likewise, any doubts as to the meaning or extent of an arbitration agreement are for the arbitrators and not the court to resolve.’ [Citations.]” (Advanced Micro Devices, supra, 9 Cal.4th at p. 372.)
Hall v. Superior Court (1993) 18 Cal.App.4th 427 is instructive. There, sellers of real property sued two individuals as brokers and agents for the seller’s property. Although the complaint did not allege a partnership between the two individuals, “it alleged that each acted as an agent for the other.” (Id. at p. 430.) Ultimately the arbitrator ruled in the sellers’ favor, finding that the two individuals were partners who were required to share the liabilities. (Id. at p. 432.) One of the individual defendants sought to vacate the arbitrator’s award, arguing that the arbitrator exceeded his jurisdiction by determining the partnership issue because the pleadings did not raise it. (Ibid.)
The trial court vacated the award, but the Court of Appeal reversed. “The arbitrator simply reached the reasonable conclusion, as he was entitled to do, that partnership was among the issues the parties submitted. The arbitrator could have reached that conclusion by reading the agency allegations of the complaint broadly to include partnership, or he could have determined that by submitting all issues in the complaint, which incorporated the listing agreement, the parties agreed to submit all issues between them.” (Hall v. Superior Court, supra, 18 Cal.App.4th at p. 437; see Grill v. Hunt (1992) 6 Cal.App.4th 73, 77, fn. 1 [rejecting claim arbitrator exceeded his powers in ruling on issue of reduction in property value because it was not pleaded as an affirmative defense, where the complaint in equity sought restitution of the excessive benefit retained by the defendant, which placed current value of property at issue].)

F. Remaking of Contract
Alam contends the arbitrator exceeded his power by remaking the contract between the parties. He cites Pacific Gas & Electric Co. v. Superior Court (1993) 15 Cal.App.4th 576, 590, 592-593, for the proposition that an arbitration award can be set aside if “the application or construction of the contract presents such an egregious mistake that it amounts to an arbitrary remaking of the contract between the parties.” But the test set forth in Pacific Gas is no longer valid. The “arbitrary remaking of the contract” test has been abrogated by the Supreme Court, in favor of a test which asks whether “the remedy . . . 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.” (Advanced Micro Devices, supra, 9 Cal.4th at p. 367.) At oral argument, Alam conceded the arbitrator’s remedy bears a rational relationship to the instant contract.

G. Remaining Claims
Alam’s remaining claims fail because they do not fall within section 1286.2, subdivision (a)’s grounds for vacating an arbitration award. They also lack substantive merit.
Assuming the existence of an oral listing agreement, Alam argues it “cannot be used to force arbitration” because there is no evidence it contains an agreement to arbitrate. But Alam was the one who moved to compel arbitration under the arbitration provisions in the listing agreement and purchase/modification agreement. Whether the parties agreed to arbitrate in the oral listing agreement is irrelevant.
Alam also claims the two-year statute of limitations under section 339, subdivision (1), barred liability for breach of the oral agreement because Kalo testified he knew of the Chinese buyers around April 30, 2011. He did, but the discovery rule also applies. (Seelenfreund v. Terminix of Northern Cal., Inc. (1978) 84 Cal.App.3d 133, 136.) A claim for breach of oral contract accrues when the aggrieved party “knew or should have known that the contract had been . . . breached.” (Ibid.)
Here, the arbitrator found that although Alam disclosed to Kalo the property would be promptly resold, he failed to disclose that he would be making a huge profit in reselling the property. Kalo testified he did not learn of the large profit Alam made until after escrow closed on his sale of the property to Alam in June 2011 and had he known, he would not have signed the 2011 purchase agreement. The complaint here, filed on May 8, 2013, was within the two-year limitations period.
Moreover, the arbitrator specifically found the oral agreement “continued until at least May 25, 2011.” Therefore, even assuming the breach occurred at that time, Kalo’s complaint was nevertheless timely filed.
III
DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal.



MOORE, ACTING P. J.

WE CONCUR:



ARONSON, J.



IKOLA, J.