L. Stroope v. Luter

Filed 10/17/07 L. Stroope v. Luter CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIFTH APPELLATE DISTRICT

APPEAL from a judgment of the Superior Court of Kern County. Louis P. Etcheverry, Judge.

Law Office of Kirk S. Tracey, Kirk S. Tracey, for Defendants and Appellants.

Arrache, Clark & Potter, Thomas S. Clark, for Plaintiff and Respondent.

-ooOoo-

Real estate agents Brook and Marc Luter (appellants) terminated their contractual relationship with broker, L. Stroope, Inc. (respondent), which led to a dispute over commissions earned by appellants on pending real estate sales. Pursuant to the parties written agreement, appellants submitted a complaint for arbitration of the dispute. However, when complications caused delay in the selection of an arbitration panel, respondent filed a civil lawsuit in the Kern County Superior Court. The lawsuit included the parties commission dispute but also added other tort and contract causes of action. Appellants petitioned the superior court to compel arbitration of the matters set forth in respondents lawsuit. The court denied the petition on the ground that a 180-day deadline provision for filing an arbitration complaint had expired, resulting in a waiver of the right to arbitrate. Appellants appeal, contending the trial court erred in its interpretation of the filing deadline. We agree. Under a proper construction of the subject provision, the arbitration complaint was timely filed as to nearly all of the pending escrows involved in the commission dispute. Furthermore, the claims set forth in respondents lawsuit were within the scope of the parties broadly worded arbitration clause. Accordingly, we will reverse the order denying the petition to compel arbitration and remand with instructions to enter a new order granting the petition, except as otherwise indicated herein.^[1]

BACKGROUND FACTS

Respondent is a licensed real estate broker in Bakersfield, California, doing business as Stroope Realtors GMAC Real Estate. Beginning in 2003, appellants were real estate agents (also called associates) for respondent. At the time the parties entered their contractual relationship, respondent was a member of the Bakersfield Association of Realtors Multiple Listing Service (MLS). Through the MLS, appellants allegedly had access to one hundred percent of the local real estate market. On March 1, 2005, respondent dropped its membership in the MLS and retained a different listing service known as the Bakersfield Listing Service (BLS). Respondent was apparently a founding member and owner in the BLS, which was a competitor to the MLS. According to appellants, the BLS provided access to a much smaller percentage of the real estate market than the MLS. As a result, appellants elected to leave respondents company and end the agent-broker relationship.

Appellants ended their contractual relationship with respondent on May 11, 2005. At that time, there were approximately 20 real estate sales that were pending or in escrow in which appellants had earned a right to receive commissions. These escrows continued to close in 2005 and 2006. The last escrow closed in June of 2006.

A dispute developed regarding the amount of commission appellants were entitled to receive from the pending escrows. Appellants believed they were entitled to their full bonus-level commission.^[2] Respondent took the position that it was only required to pay a 50 percent commission based on a provision in the parties agreement that agents who leave the company receive a reduced commission. Appellants, through counsel by a letter dated June 9, 2005, maintained that because respondent unilaterally switched to the BLS, respondent had materially frustrated the contract and could not enforce the forfeiture provision.

In late December of 2005,^[3]appellants filed a claim for arbitration with the Bakersfield Association of Realtors. The arbitration request was made pursuant to the parties written agreement, which provided as follows:

All disputes or claims between Associate-Licensee and Broker, arising from or connected in any way with this Agreement, which cannot be adjusted between the parties involved, shall be submitted to the Association of REALTORS of which all such disputing parties are members for arbitration pursuant to the provisions of its Bylaws, as may be amended from time to time, which are incorporated as a part of this Agreement by reference. If the Bylaws of the Association do not cover arbitration of the dispute, or if the Association declines jurisdiction over the dispute, then arbitration shall be pursuant to the rules of California law. The Federal Arbitration Act, Title 9, U.S. Code, Section 1, et seq., shall govern this Agreement.

The Bylaws of the Bakersfield Association of Realtors specifically reference and adopt the arbitration procedures set forth in the California Code of Ethics and Arbitration Manual (hereafter Arbitration Manual), prepared by the California Association of Realtors (CAR). Section 56(b) of the Arbitration Manual delineates the required procedure for requesting arbitration and sets forth a time deadline for doing so, as follows:

A complaint must be filed within one hundred and eighty (180) calendar days after the closing of the transaction, if any, or after the facts constituting the arbitrable matter could have been known in the exercise of reasonable diligence, whichever is later.^[4]

Once appellants request for arbitration was made, there was an initial effort by both sides to proceed with arbitration. However, it soon became apparent that selection of an arbitration panel would be a difficult undertaking. Respondent objected to having the Bakersfield Association of Realtors handle the arbitration because respondent was adverse to that association in a lawsuit concerning the BLS. Although that lawsuit was settled in early 2006, respondent believed that many of the individual members of the Bakersfield Association of Realtors would be biased against it. Respondent eventually indicated it would consent to have the matter arbitrated in Bakersfield, but only if certain approved panelists were used. Throughout these discussions, respondent continued to affirm its willingness to proceed with arbitration, and even suggested an alternative forum such as the Tulare County or the Antelope Valley Board of Realtors.

For their part, appellants resisted having the matter heard outside of Kern County, but eventually agreed to the dispute being heard by the Antelope Valley Board of Realtors. The matter was subsequently transferred from Bakersfield to the Antelope Valley Board of Realtors, apparently because there were not enough panel members the parties could agree upon to arbitrate the matter in Bakersfield.

Respondent filed its lawsuit in the Kern County Superior Court on April 4, 2006. The allegations of respondents superior court complaint sounded both in tort and contract, and the causes of action were characterized as follows: (1) tortious interference with economic relations and prospective advantage; (2) negligent interference with economic relations and prospective advantage; (3) fraud and misrepresentation; (4) declaratory relief; (5) conversion/misappropriation; and (6) unfair competition. The parties dispute with respect to appellants commissions was set forth in the declaratory relief cause of action. The other causes of action asserted that appellants breached their contractual or fiduciary duties, misrepresented themselves, and/or unfairly competed by (among other things) starting a competing business while still under contract with respondent.

On June 7, 2006, appellants filed their petition to compel arbitration. Appellants argued that all of the issues raised in respondents lawsuit had to be arbitrated pursuant to the parties written agreement to arbitrate disputes. Respondent opposed the petition on several grounds, including that appellants had waived their right to arbitrate under the 180-day deadline provision. Respondent argued that the parties were fully apprised of the factual basis of the dispute at least by the time of the June 9, 2005 letter sent by appellants counsel, and that the arbitration complaint was not filed with the Bakersfield Association of Realtors until late December of that year, which was more than 180 days later. In reply, appellants emphasized the alternative accrual date provided for in the deadline provision, along with the whichever is later language, which permitted an arbitration complaint to be filed 180 days after the close of a transaction. According to appellants, this meant that the triggering event for the 180-day period would be the close of each escrow and/or the close of the final escrow.

The trial court rejected appellants position and held that the June 9, 2005 letter reflected sufficient knowledge to trigger the 180-day filing requirement. The court concluded that the 180-day period expired prior to the filing of the arbitration complaint, and hence appellants had waived their right to arbitration. Consequently, the petition to compel arbitration was denied.

Appellants filed a timely notice of appeal from the order denying the petition.

DISCUSSION

I. Standard of Review

This appeal turns on issues of contractual interpretation; in particular, the meaning of the referenced 180-day deadline provision. There is no factual dispute or any conflicting extrinsic evidence on the question of the parties intent. Therefore, we construe the meaning of the written arbitration provision de novo and we are not bound by the trial courts interpretation. (Norcal Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 71; Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 684 (Coast Plaza).) Whether an arbitration agreement applies to a controversy is a question of law to which the appellate court applies its independent judgment where no conflicting extrinsic evidence in aid of interpretation was introduced in the trial court. (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1670.)

II. Principles of Contractual Interpretation

Private arbitration is a matter of agreement between the parties and is governed by contract law. (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 313.) The fundamental goal of contract interpretation is to give effect to the mutual intention of the parties as it existed at the time of contracting. (Civ. Code,  1636; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) When a contract is set forth in writing, the intention of the parties is to be ascertained from the writing alone, if possible. (Civ. Code,  1639; Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 955.) If the language of a contract is clear and explicit, it governs. (Civ. Code,  1638; Bank of the West v. Superior Court, supra, at p. 1264.)

III. Doubts Resolved in Favor of Arbitration

California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration. (Coast Plaza, supra, 83 Cal.App.4th at p. 686, citing Christensen v. Dewor Developments (1983) 33 Cal.3d 778, 782.) This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute. [Citation.] [Citation.] (Coast Plaza, supra, at p. 686.) It seems clear that the burden must fall upon the party opposing arbitration to demonstrate that an arbitration clause cannot be interpreted to require arbitration of the dispute. (Id. at pp. 686-687.)

As our Supreme Court has emphasized: The policy of the law in recognizing arbitration agreements and in providing by statute for their enforcement is to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of their differences by a tribunal of their own choosing. [Citation.] (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) Thus, the courts indulge every intendment in favor of arbitration. (Ibid.)

IV. Untimely Demand as a Potential Basis for Waiver of Arbitration

While waiver generally denotes the voluntary relinquishment of a known right, it can also refer to the loss of a right as a result of a partys failure to perform an act it is required to perform, regardless of the partys intent to relinquish the right. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195, fn. 4.) A failure to meet a contractual deadline for demanding arbitration falls into the second category and results in a waiver of the right to compel arbitration. (Platt Pacific, Inc. v. Andelson, supra, 6 Cal.4th at pp. 313-314.) [A] contractual requirement that a partys demand for arbitration must be made within a certain time is a condition precedent to the right to arbitration. In the absence of a legal excuse or subsequent modification of the parties agreement, the failure to submit the dispute to arbitration within the agreed time precludes judicial enforcement of the right to arbitrate. (Id. at p. 321.) Nevertheless, waivers are not to be lightly inferred and any doubts regarding an alleged waiver are to be resolved in favor of arbitration. (St. Agnes Medical Center v. PacifiCare of California, supra, at p. 1195.)

V. Trial Court Erred in Construing Arbitration Deadline Provision and in Finding an Entire Waiver of Arbitration Rights

At the hearing of the petition to compel arbitration, the trial court was called upon to determine the enforceability of the arbitration agreement pursuant to title 9 of the Code of Civil Procedure ( 1280 et seq.).^[5] Section 1281 provides: 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. Section 1281.2 sets forth the enforcement mechanism as follows: 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: [] (a) The right to compel arbitration has been waived by the petitioner; or [] (b) Grounds exist for the revocation of the agreement. Through the detailed statutory scheme set forth in these and other provisions of title 9, the Legislature has expressed a strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution. [Citations.] Consequently courts will indulge every intendment to give effect to such proceedings. [Citations.] (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 9.)

With the above principles in mind, we now turn to issues of interpretation that are before us. The operative language of the subject arbitration provision is found at section 56(b) of the Arbitration Manual. It states as follows: A complaint must be filed within one hundred and eighty (180) calendar days after the closing of the transaction, if any, or after the facts constituting the arbitrable matter could have been known in the exercise of reasonable diligence, whichever is later.

Respondent takes the position that appellants failed to file their arbitration complaint within the time period specified in the above provision and therefore the right to compel arbitration was waived. Specifically, respondent contends the 180-day time period began running when the relevant facts of the controversy were known -- i.e., shortly after the termination of the contractual relationship when the parties first articulated their dispute as to appellants commissions. In respondents view, once these facts were known to appellants, the clock began running and no subsequent closing (or closings) of the transaction were applicable to the parties dispute.

In contrast, appellants position is that under the unambiguous wording of the subject provision, the right to arbitration was not waived because the 180-day period must be measured with reference to the closing of the escrows in which commissions were due to appellants. According to appellants, the December arbitration complaint was timely filed because numerous escrows closed within 180 days prior to that date, and escrows continued to close thereafter until June of 2006. As explained below, we agree with appellants and conclude that the right to arbitration was not waived, except as to those few escrows that closed more than 180 days prior to the date the arbitration complaint was filed.

The language of section 56(b) of the Arbitration Manual clearly requires the 180 days to be measured from the later of two triggering events. One of those events is the closing of the transaction, if any. Here, in the context of a dispute between a real estate broker and its agents over how much in commissions should be paid to the agents from several pending escrows that were closing over a period of time, we believe the term closing of the transaction must be viewed with reference to the closing of the escrows.^[6] Such a construction not only comports with (and gives full significance to) the actual wording of the deadline provision, it also best preserves and facilitates the right to arbitration. It is clear that section 56(b) of the Arbitration Manual was not meant to cut off arbitration rights at the earliest possible date, but rather it was intended to favor the right to arbitration by extending the filing time to the later of the two dates. Moreover, we resolve all doubts in favor of arbitration, which principle would be violated by adoption of respondents construction of the agreement.^[7]

The above conclusion, however, does not fully resolve all the issues of interpretation. As noted by appellants, there are two reasonable ways of applying the closing of the transaction language to the closings of the escrows in this case. One possibility is to construe closing of the transaction as the disposition or settling of all accounts in the pending escrows. Under this approach, the transaction would not have closed or concluded until the last of the pending escrows closed in June of 2006, at which point appellants would have learned the full extent of their damages. Alternatively, appellants offer that closing of the transaction could reasonably refer to each individual escrow as a distinct transaction or claim, in which case the arbitration complaint would have to be filed within 180 days after the closing of individual escrows.

We agree with the latter view. Under the parties contract defining the terms of their relationship as broker and agents, including the terms of compensation, it appears that the close of each sale (or escrow) would represent a distinct right to compensation by a real estate agent, which would be payable in the form of a percentage of the commission received by the broker in that particular real estate transaction. Each escrow therefore represents a distinct right or claim. Accordingly, we hold that in order to preserve the right to arbitrate a dispute regarding the amount of commission received from a particular escrow, the arbitration complaint would have to be filed within 180 days of the closing thereof.

It is undisputed that there were numerous escrows that closed within the 180 days prior to the filing of appellants arbitration claim, as well as after the filing. As to all such escrows, the arbitration complaint was timely filed and appellants did not waive the right to arbitrate. Accordingly, we reverse the trial courts order denying the petition to compel arbitration with instructions that the court enter a new order granting the petition as to all such timely claims for additional commission.

However, as to commission disputes relating to any escrows that closed more than 180 days prior to filing of the arbitration complaint -- and appellants concede that three of the escrows fall into this category -- the arbitration complaint was untimely filed and the right to compel arbitration was waived. On remand, the trial court shall determine which of the escrows closed more than 180 days prior to the filing of the arbitration complaint by appellants, as to which appellants have waived the right to compel arbitration.

VI. Respondents Lawsuit Was Within the Scope of the Contracts Arbitration Clause

Because it found that arbitration was waived, the trial court never reached the issue of whether all the causes of action set forth in respondents lawsuit were subject to the parties arbitration agreement. We note the parties contract contains a broad arbitration clause that requires the arbitration of [a]ll disputes or claims between Associate-Licensee and Broker, arising from or connected in any way with this Agreement. Such broad terms as in connection with an agreement or arising under or concerning an agreement have routinely been held to include both tort and contract claims. (Coast Plaza, supra, 83 Cal.App.4th at pp. 681, 686; Izzi v. Mesquite Country Club (1986) 186 Cal.App.3d 1309, 1315-1316.) In the particular situation where contracts provide arbitration for any controversy ... arising out of or relating to the contract ... the courts have held such arbitration agreements sufficiently broad to include tort, as well as contractual, liabilities so long as the tort claims have their roots in the relationship between the parties which was created by the contract. [Citations.] (Izziv. Mesquite Country Club, supra, at pp. 1315-1316.) It has long been the rule in California that a broadly worded arbitration clause, such as we have here, may extend to tort claims that may arise under or from the contractual relationship. There is no requirement that the cause of action arising out of a contractual dispute must be itself contractual. At most, the requirement is that the dispute must arise out of contract. (Coast Plaza, supra, at p. 686.)

Here, all of the causes of action set forth in respondents lawsuit are matters arising out of the parties contractual relationship established in their agreement. Moreover, because of the strong policy that favors arbitration of disputes, if there is any reasonable doubt as to whether a respondents claims come within the arbitration clause, that doubt must be resolved in favor of arbitration, not against it. (Coast Plaza, supra, 83 Cal.App.4th at pp. 686-687.) We readily conclude that respondents lawsuit, and all of the claims therein, come within the scope of the arbitration provision.^[8]

VII. Other Issues

Respondent contends that any error in construing the 180-day filing deadline was harmless because other grounds existed for finding that the right to arbitration was lost or relinquished. Specifically, respondent claims that appellants abandoned the right to arbitrate by their initial refusal to accept the jurisdiction of the Antelope Valley Association of Realtors. We disagree. In the record before us, there is no conduct amounting to relinquishment of the right to arbitrate or inconsistent therewith. (St. Agnes Medical Center v. PacifiCare of California, supra, 31 Cal.4th at p. 1187.) At most, appellants conduct indicated a disagreement over where the arbitration would occur. As a matter of law, respondent has failed to meet its heavy burden of establishing waiver of the right to arbitrate. (Id. at p. 1195 [party seeking to establish a waiver bears a heavy burden of proof].)^[9]

Finally, respondent argues that the Bakersfield Association of Realtors will not be able to hear the matter to the extent that panelists have a bias or conflict of interest, and other associations such as the Antelope Valley Association of Realtors may potentially decline to hear the matter. By these propositions, respondent argues that it will be impossible to conduct arbitration in this case. Not so. First, even assuming for the sake of argument that the Bakersfield Association of Realtors cannot conduct the arbitration (for reasons of conflict of interest or otherwise), respondent has not conclusively shown that one of the alternative associations, such as the Antelope Valley Association of Realtors, could not do so. It simply remains to be seen whether the Antelope Valley Association of Realtors, or another available forum, will arbitrate the matter once the petition to compel arbitration is granted by the trial court following our remand. Second, the parties agreement unequivocally states that [i]f the Bylaws of the Association do not cover arbitration of the dispute, of if the Association declines jurisdiction over the dispute, the parties are required to arbitrate their dispute pursuant to the rules of California law. Thus, if one arbitration forum becomes unavailable, it is the parties obligation to find another and thereby arbitrate their dispute. We conclude that respondents impossibility argument is without merit.

In summary, the claims set forth in respondents civil lawsuit come within the scope of the parties broad arbitration agreement, and appellants have not waived their right to arbitrate, with the sole exception that the right to compel arbitration is waived concerning those few escrows that closed more than 180 days prior to the filing of the arbitration complaint.

DISPOSITION

We reverse the trial courts order denying appellants petition to compel arbitration, and remand with instructions that the court enter a new order granting the petition consistent herewith. Appellants are entitled to costs on appeal.

_____________________

Kane, J.

WE CONCUR:

_____________________

Harris, Acting P.J.

_____________________

Dawson, J.

Publication courtesy of California pro bono legal advice.

Analysis and review provided by La Mesa Property line attorney.

^[1] As we explain more fully hereafter, the right to compel arbitration was waived under the 180-day filing deadline as to a small fraction of the total number of escrows that were involved in the parties dispute over appellants earned commissions.

^[2] Appellants were in the bonus bracket, allegedly entitling them to 100 percent of the commissions received after certain administrative deductions by respondent.

^[3] Appellants contend the arbitration complaint was filed on December 22, 2005, while respondent asserts it was filed on December 27, 2005. There is evidence to support either date and the trial court did not address the issue. On remand, if the difference between the alleged filing dates becomes material to the question of whether the arbitration complaint was timely filed as to any particular escrow or escrows, the trial court shall resolve the factual dispute as to which date is correct.

^[4] We have received these written documents as part of the augmented record. Respondents request that we judicially notice the contents of the aforesaid Bylaws and the Arbitration Manual is granted.

^[5] Unless otherwise indicated, all further statutory references are to the Code of Civil Procedure.

^[6] In opposition, respondent relies on section 42(b) of the Arbitration Manual, which states the duty to arbitrate disputes between broker and agent arises when facts giving rise to the dispute occur. That provision does not change our analysis. The duty to arbitrate is a distinct issue from the condition that a claim must be filed within an expressly defined time period as provided in section 56(b) of the Arbitration Manual. Further, we reject respondents unsupported suggestion that the closing of the transaction language should not apply in a dispute between broker and agent. The wording of section 56(b) of the Arbitration Manual is plainly comprehensive in its scope and there is no restrictive or qualifying language therein. Nothing in sections 41 and 42 of the Arbitration Manual requires a different construction. Moreover, as the present case illustrates, given the commission nature of the real estate business, there will obviously be instances in which disputes between agent and broker will be linked to transactions or escrows.

^[7] Another reason the 180 days should be understood as commencing at the close of escrow is that, generally speaking, only at that time would a real estate agent have the ability to ascertain with certainty the existence and extent of damages in cases such as this one (i.e., failure to pay full commission).

^[8] Although the civil complaint includes a cause of action denominated as unfair competition, it is apparently a common law, nonstatutory claim. In any event, it seeks damages or restitution only, and not injunctive relief for the public benefit under the Unfair Competition Law. Hence, it is clearly arbitrable. (Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 318, 320; Aral v. EarthLink, Inc. (2005) 134 Cal.App.4th 544, 553.)

^[9] When the facts are undisputed and only one inference may be reasonably drawn, the issue of waiver becomes one of law. (St. Agnes Medical Center v. PacifiCare ofCalifornia, supra, 31 Cal.4th at p. 1196.)