Masters v. Berman CA2/7 ( 2021 )

Filed 4/7/21 Masters v. Berman CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
PAMELA ANN MASTERS et al., B301793
Plaintiffs and Respondents. (Los Angeles County
Super. Ct. No. 19BBCV00495)
v.
DARYL ANN BERMAN,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County, C. Edward Simpson, Judge. Reversed with
directions.
The Wall Law Office, William J. Wall; Yourist Law
Corporation, Bradley J. Yourist, and Daniel J. Yourist for
Defendant and Appellant.
Barak Lurie and Brent A. Kramer for Plaintiffs and
Respondents.
Daryl Ann Berman appeals from an order denying her
motion to compel arbitration of the claims brought by Pamela
Ann Masters and her business partner Carmen Santa Maria for
implied indemnity, negligence, and unjust enrichment. After
Berman executed a purchase agreement to sell her property to
Santa Maria, Berman engaged in negotiations for the sale of the
property to her then-tenant James Smyth, based on a purported
handwritten right of first refusal in Smyth’s lease. After Berman
rejected Smyth’s offer and sold the property to Masters and
Santa Maria, Smyth brought a quiet title action against Berman,
Masters, and Santa Maria, claiming he had a right to the
property based on his right of first refusal. Berman, Masters,
and Santa Maria successfully demurred to Smyth’s suit, and the
resulting judgment of dismissal was affirmed on appeal. (Smyth
v. Berman (2019) 31 Cal.App.5th 183 (Smyth).)
Masters and Santa Maria then filed this action to recover
their attorneys’ fees incurred in defending against Smyth’s quiet
title action. Berman moved to compel arbitration based on an
arbitration provision in the purchase agreement. The trial court
denied Berman’s motion, finding the present dispute arose from
Berman’s alleged conduct with respect to her lease to Smyth (by
not clarifying the right of first refusal), not the later purchase
agreement. On appeal, Berman contends the trial court erred in
finding the dispute arose from the prior lease instead of the
purchase agreement. We agree and reverse.
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BACKGROUND AND PROCEDURAL HISTORY
A. The Property, the Lease, and the Sale1
Berman owned property located on Cahuenga Boulevard in
North Hollywood (the property). (Smyth, supra, 31 Cal.App.5th
at p. 186.) From 1999 until 2016, Berman leased the property to
Smyth. In 2011 Smyth and Berman executed a written lease for
the property, into which Smyth inserted a handwritten term
providing Smyth a “‘[r]ight of 1st refusal to purchase.’” Smyth
and Berman initialed the addition. (Ibid.)
In June 2016 Santa Maria submitted a written offer to
purchase the property from Berman. (Smyth, supra,
31 Cal.App.5th at p. 186.) On June 29, 2016 Berman and Santa
Maria executed a purchase agreement.2 Paragraph 32 of the
purchase agreement provided, “All disputes arising between the
[p]arties with respect to the subject matter of this Purchase
Agreement or the transaction contemplated herein . . . shall be
settled exclusively by final, binding arbitration.” Under
paragraph 15 of the agreement, Santa Maria agreed, upon his
satisfaction with title and contingencies, to purchase the property
“‘as is’ and solely on reliance on [his] own investigation of the
[p]roperty. . . . Upon [c]losing, [Santa Maria] hereby waives,
releases, acquits, and forever discharges [Berman] . . . from any
and all claims, actions, causes of action, demands, rights,
1 These facts are taken from allegations in the complaint,
the purchase agreement (submitted by Berman as an exhibit to
her motion to compel arbitration), and Smyth, supra,
31 Cal.App.5th 183.
2 Berman signed the agreement on June 28; Santa Maria
signed the agreement on June 29.
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liabilities, damages, losses, costs expenses, or compensation
whatsoever, direct or indirect, known or unknown, foreseen or
unforeseen, that it now has or which may arise in the future on
account of or in any way growing out of or connected with
Property Condition.” Paragraph 15 of the agreement defined
“Property Condition” to mean “each and every matter of concern
or relevance to [Santa Maria] relating to the [p]roperty, including
without limitation the financial, legal, title, physical, geological
and environmental condition and sufficiency of the
[p]roperty . . . ; title matters; and contracts to be assumed by
[Santa Maria].”
On August 4, 2016, while the property was in escrow
pending the sale to Santa Maria, Smyth submitted an offer to
purchase the property from Berman, asserting his purported
right of first refusal in the 2011 lease. Berman declined Smyth’s
offer because Santa Maria’s offer was “higher,” for “considerably
more money.” Ultimately, Berman sold the property to Masters
and Santa Maria,3 who recorded a grant deed and deed of trust
on August 19, 2016. (Smyth, supra, 31 Cal.App.5th at p. 187.)
B. Smyth’s Quiet Title Action
Smyth sued Berman, Masters, and Santa Maria to quiet
title to the property based on his asserted right of first refusal.4
3 Although Masters did not sign the purchase agreement, she
does not contend she is not bound by the arbitration provision.
4 Smyth also asserted causes of action for specific
performance, breach of contract, intentional misrepresentation,
tortious interference with contractual relations, negligence,
fraud, and civil conspiracy. (Smyth, supra, 31 Cal.App.5th at
pp. 187-189.)
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(Smyth, supra, 31 Cal.App.5th at pp. 187-188.) In his third
amended complaint, Smyth also alleged emails he exchanged
with Berman in July 2016 granted him an enforceable right of
first refusal to purchase the property independent of the terms of
the 2011 lease. (Id. at p. 189.)
Berman and Santa Maria separately demurred to Smyth’s
third amended complaint. (Smyth, supra, 31 Cal.App.5th at
p. 190.) The trial court sustained the demurrers without leave to
amend, finding there was no enforceable promise to grant Smyth
a right of first refusal in August 2016. (Ibid.) The Court of
Appeal affirmed. (Id. at p. 199.)
C. Masters and Santa Maria’s Complaint
On June 4, 2019 Masters and Santa Maria (plaintiffs) filed
this action against Berman alleging causes of action for implied
indemnity, negligence, and unjust enrichment (quasi-contract).
The complaint alleged “Berman’s conduct was the sole reason
why Smyth sued Santa Maria and Masters in the quiet title
action.” (Capitalization omitted.) The complaint alleged Berman
carelessly drafted the lease with Smyth by failing to provide for
expiration of the right of first refusal and failing to specify how
competing offers would be evaluated. Further, Berman recklessly
communicated with Smyth regarding his right of first refusal in
the summer of 2016 by failing to inform Smyth his lease (and the
right of first refusal) had expired and that Berman was selling
the property to Masters and Santa Maria. The complaint alleged
“Berman owed a duty of care to [plaintiffs] to reject Smyth’s claim
to a purported [right of first refusal], because no such [right of
first refusal] existed at the time of the sale to [plaintiffs].
Berman further owed a duty to [plaintiffs] to refrain from selling
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the property, or even offering to sell the property, to Smyth.”
(Capitalization and underscoring omitted.) The complaint sought
approximately $300,000 in attorneys’ fees incurred by plaintiffs
in defending against Smyth’s claims in the trial and appellate
courts.
D. Berman’s Motion To Compel Arbitration
On August 14, 2019 Berman moved to compel arbitration.
Berman argued the parties entered into a binding agreement in
June 2016 to arbitrate any disputes arising from plaintiffs’
purchase of the property, and plaintiffs’ claims arose from their
August 2016 purchase of the property. Berman attached as an
exhibit the 2016 purchase agreement signed by Berman and
Santa Maria.
Plaintiffs opposed Berman’s motion, arguing the dispute
arose from the 2011 lease and 2016 negotiations between Berman
and Smyth, not the purchase agreement.
On October 4, 2019 the trial court denied Berman’s motion.
The court reasoned plaintiffs’ action was based on events that
preceded their purchase of the property because the action was
“primarily based on their theory that [Berman] poorly drafted a
lease agreement with Smyth regarding the Right of First Refusal
provision. . . . Thus, this action does not necessarily arise out of
the sale of the property under the Purchase Agreement, but
rather arises from the allegations that [Berman] failed to reject
Smyth’s claim to a purported Right of First Refusal . . . . [¶]
. . . [H]ad there been an issue with the terms of the Purchase
Agreement, a dispute/breach thereto, failure to perform, default,
etc., such matters would be subject to arbitration.”
Berman timely appealed.
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DISCUSSION
A. Arbitration Law and Standard of Review
California law strongly favors arbitration “‘“as a speedy and
relatively inexpensive means of dispute resolution.”’” (OTO,
L.L.C. v. Kho (2019) 8 Cal.5th 111, 125; accord, Khalatian v.
Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th 651, 658
(Khalatian) [“Arbitration is strongly favored, and any doubts
concerning the scope of arbitrable issues will be resolved in favor
of arbitration.”]; Elijahjuan v. Superior Court (2012) 210
Cal.App.4th 15, 20 (Elijahjuan) [“‘California law, like federal law,
favors enforcement of valid arbitration agreements.’”].) To
further this purpose, there is a presumption in favor of
arbitrability. (OTO, at p. 125; Khalatian, at p. 658.) The
presumption applies if “the terms of the specific arbitration
clause under consideration . . . reasonably cover the dispute as to
which arbitration is requested.” (Bono v. David (2007)
147 Cal.App.4th 1055, 1063; accord, Rice v. Downs (2016)
248 Cal.App.4th 175, 185 (Rice) [“‘[A]rbitration should be upheld
“unless it can be said with assurance that an arbitration clause is
not susceptible to an interpretation covering the asserted
dispute.”’”].) “The party opposing arbitration has the burden to
show that the agreement does not apply to the dispute.”
(Khalatian, at p. 659; accord, Rice, at p. 185.)
“Notwithstanding the policy favoring arbitration, because
‘“arbitration is a matter of contract[,] . . . a party cannot be
required to submit to arbitration any dispute which he has not
agreed . . . to submit.”’” (Khalatian, supra, 237 Cal.App.4th at
p. 659; accord, Elijahjuan, supra, 210 Cal.App.4th at p. 20.) In
interpreting an arbitration agreement, our goal is to give effect to
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the mutual intention of the parties at the time they entered into
the agreement. (Elijahjuan, at pp. 20-21; Balandran v. Labor
Ready, Inc. (2004) 124 Cal.App.4th 1522, 1527-1528; see Civ.
Code, § 1636 [“A contract must be so interpreted as to give effect
to the mutual intention of the parties as it existed at the time of
contracting.”].)
Where, as here, the facts are undisputed, we review the
denial of a motion to compel arbitration de novo. (OTO, L.L.C. v.
Kho, supra, 8 Cal.5th at p. 126; Elijahjuan, supra,
210 Cal.App.4th at p. 20; Nguyen v. Tran (2007) 157 Cal.App.4th
1032, 1036.) “‘We are not bound by the trial court’s construction
or interpretation.’” (Rice, supra, 248 Cal.App.4th at p. 185;
accord, Coast Plaza Doctors Hospital v. Blue Cross of California
(2000) 83 Cal.App.4th 677, 684 (Coast Plaza).)
B. The Trial Court Erred in Denying Berman’s Motion To
Compel Arbitration
Berman contends the trial court erred in denying her
motion to compel arbitration because any duty she owed to
plaintiffs arose from her sale of the property to plaintiffs under
the purchase agreement. Plaintiffs argue their claims arise from
Berman’s negligence in drafting the 2011 lease and her 2016
discussions with Smyth, which are not disputes arising “with
respect to” the subject matter of the purchase agreement or the
real estate transaction. Berman has the better argument.5
5 We reject plaintiffs’ argument Berman forfeited her claims
by failing to argue in the trial court that any duty she owed
plaintiffs arose from the purchase agreement. Berman argued
below, as she does on appeal, that “[p]laintiffs’ claims arise from
8
The parties’ agreement to arbitrate “[a]ll disputes
arising . . . with respect to the subject matter of [the] Purchase
Agreement or the transaction contemplated [therein]”
demonstrates the parties’ broad agreement to arbitrate all
disputes relating to the sale of the property.6 (See Johnson v.
Greenelsh (2009) 47 Cal.4th 598, 601, fn. 3 [arbitration clause
providing for arbitration of “any and all disputes” between
trustees and beneficiaries concerning property owned by any
trust or operation of any trust created by agreement was
“broad”]; Yuen v. Superior Court (2004) 121 Cal.App.4th 1133,
1138 [arbitration clause stating “all disputes” relating to contract
shall be submitted to arbitration was “broad”]; Coast Plaza,
supra, 83 Cal.App.4th at pp. 684, 681 & fn. 2 [agreement to
arbitrate “‘any problem or dispute’ that arose under or concerned
the terms of the [service agreement]” is “clear,” “plain,” and “very
broad,” giving rise to a presumption parties intended to arbitrate
claims including tort claims relating to the agreement]; Larkin v.
Williams, Woolley, Cogswell, Nakazawa & Russell (1999) 76
Cal.App.4th 227, 230 [arbitration provision that extended to
“[a]ny controversy or claim arising out of or relating to any
provision of this [partnership] [a]greement or the breach thereof”
was “very broad”].)
their August 2016 purchase of [the] [p]roperty,” and “the
purchase of the [p]roperty was subject to [the] Purchase
Agreement.”
6 The phrase “with respect to” means “with reference to” or
“in relation to.” (Merriam-Webster’s Online Dict. (2021)
[as of
April 5, 2021], archived at .)
9
Despite plaintiffs’ attempt to distance themselves from the
purchase agreement, their purchase of the property is central to
the allegations in the complaint. The complaint alleged “Berman
owed a duty of care to [plaintiffs] to reject Smyth’s claim to a
purported [right of first refusal], because no such [right of first
refusal] existed at the time of the sale to [plaintiffs].” (Italics
added.) Plaintiffs alleged further that Berman “owed a duty to
[plaintiffs] to refrain from selling the property, or even offering to
sell the property, to Smyth,” conduct that allegedly took place
after Berman agreed to sell the property to plaintiffs and the
property was in escrow. (Capitalization omitted; italics added.)
And plaintiffs alleged Berman breached the duty of care she owed
to them by “failing to explain to Smyth that she was
unequivocally selling the property to [plaintiffs].” (Capitalization
omitted.) These allegations illustrate that Berman’s conduct in
drafting the 2011 lease and in negotiating with Smyth in 2016
over the sale of the property is only relevant because of its impact
on the sale of the property. Absent the transaction, plaintiffs
were strangers to the lease agreement between Berman and
Smyth.
Moreover, the condition of title conveyed by the sale is an
express subject of the purchase agreement. Under paragraph 15
of the purchase agreement, Santa Maria waived any claim
“growing out of or connected with” the condition of the property,
“including . . . title . . . condition and sufficiency[,] . . . title
matters[,] and contracts to be assumed by [Santa Maria].”
Smyth’s quiet title action sought to resolve conflicting claims
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regarding title to the property.7 Because this action seeks to
establish Berman’s liability for conduct that caused Smyth to sue
over title, the instant dispute can reasonably be said to arise
“with respect to” the subject matter of the purchase agreement,
including liability for the condition of the property’s title under
paragraph 15.
Plaintiffs alternatively argue the present dispute is outside
the scope of the arbitration provision because their complaint
alleges Berman breached a common law duty of care sounding in
tort, not a breach of contractual duty under the purchase
agreement, relying on Rowland v. Christian (1968) 69 Cal.2d 108.
But tort claims may also fall within the scope of the arbitration
provision. (See Coast Plaza, supra, 83 Cal.App.4th at p. 685 [“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.”]; Berman v. Dean Witter & Co., Inc. (1975)
44 Cal.App.3d 999, 1003 [“The phrase ‘any controversy . . .
arising out of or relating to this contract . . .’ is certainly broad
enough to embrace tort as well as contractual liabilities so long as
they have their roots in the relationship between the parties
which was created by the contract.”].)
In Coast Plaza, the Court of Appeal considered whether an
arbitration provision in a service agreement between a hospital
7 The object of a quiet title action “‘“‘is to finally settle and
determine, as between the parties, all conflicting claims to the
property in controversy, and to decree to each such interest or
estate therein as he may be entitled to.’”’” (Robin v. Crowell
(2020) 55 Cal.App.5th 727, 740; accord, Western Aggregates, Inc.
v. County of Yuba (2002) 101 Cal.App.4th 278, 305.)
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and service provider was broad enough to cover the hospital’s
claim for negligent interference with prospective economic
advantage based on the service provider’s refusal to renegotiate
reimbursement rates in the service agreement. (Coast Plaza,
supra, 83 Cal.App.4th at pp. 681-682.) The court found the tort
claim fell within the arbitration provision’s broad terms—
encompassing “‘any problem or dispute’ that arose under or
concerned the terms of the [service agreement]”—and rejected the
hospital’s “assumption that if one is not suing on a claim that is
based upon the contract, but rather upon the alleged tortious
misconduct of the other contracting party, then the contract’s
requirement of an arbitration process can be ignored.” (Id. at
pp. 684-685.) The court explained the tort claims came within
the arbitration provision because they were rooted in the
relationship between the parties created by the service
agreement. (Id. at p. 686.) Here too the broad arbitration
provision in the purchase agreement covers plaintiffs’ tort claims
that are rooted in the relationship between Berman and plaintiffs
created by the purchase agreement and the sale of the property.8
8 We do not reach plaintiffs’ contention Berman cannot force
plaintiffs’ attorneys (as nonparties to the arbitration agreement)
to arbitrate their claims against Berman. The action was filed by
Masters and Santa Maria, not their attorneys, and Berman
moved to compel only plaintiffs to arbitrate their claims.
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DISPOSITION
The order is reversed. The trial court is directed to enter a
new order granting the motion to compel arbitration. Berman is
to recover her costs on appeal.
FEUER, J.
We concur:
SEGAL, Acting P. J.
MCCORMICK, J.*
* Judge of the Orange Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California
Constitution.
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