Opinion
A143209
07-10-2017
20 HIGHLAND AVE., LLC AND CALIFORNIA DRIVE HOLDINGS, LLC, Plaintiffs and Appellants, v. LUKE WANG, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Mateo County Super. Ct. No. CIV529801)
Plaintiffs and appellants California Drive Holdings, LLC (First Buyer), and its assignee, 20 Highland Ave., LLC (Second Buyer) (collectively, Buyers), appeal from a superior court order denying their motion to compel arbitration. They maintain First Buyer had an agreement to purchase an apartment building from defendant and respondent Luke Wang, which included an arbitration clause, and Wang's belated attempt to revoke his counteroffer, after First Buyer had accepted it, was legally ineffective. We agree and reverse the order.
I. BACKGROUND
The essential facts are undisputed. On May 30, 2014, two representatives of real estate broker Cassidy Turley presented to Wang a 13-page proposed purchase agreement from Buyer. The proposed agreement, signed by First Buyer's Manager Kent Putnam, offered to buy an apartment building that Wang owned (the property) for $3.5 million, with Cassidy Turley to act as a dual agent, representing both buyer and seller.
All relevant events in this matter occurred during 2014.
After he reviewed the document, Wang crossed out the purchase price on the first page, writing in $3.6 million instead. He initialed this change, and then signed the agreement. Section 17 of the agreement contained an arbitration provision. Titled " ARBITRATION OF DISPUTES ," in the same font as the remainder of the document, that provision stated, "Buyer and Seller agree any dispute or claim, at law or in equity, arising out of this contract . . . shall be decided by neutral binding arbitration in accordance with the rules of the American Arbitration Association, and not by court action . . . ." In the next paragraph, the provision continued, "NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION . . . . [¶] BY INITIALING BELOW WE ACKNOWLEDGE THAT WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION TO NEUTRAL ARBITRATION." Wang does not dispute that he specifically initialed the arbitration provision, and each of the 13 pages of the agreement.
The parties suggest on appeal that Wang also may have written in another provision allowing himself to live rent free for one year in one of the units in the apartment building after the sale. There was no suggestion in the briefs that inclusion of the provision affected either parties' intentions regarding finalization of the purchase agreement. Wang's claim for the first time at oral argument that Putnam did not separately initial the provision does not affect our analysis, because, as will be discussed, acceptance of the counter-offer was communicated orally. (See also, e.g., Collins v. Navister, Inc. (2013) 214 Cal.App.4th 1486, 1508, fn. 8 [arguments may not be raised for the first time at oral argument].)
The same day (May 30), a Cassidy Turley representative informed Putnam of Wang's change to the proposed purchase price, and Putnam approved the change, adding his initials next to Wang's on the first page of the agreement. Putnam returned the agreement to Cassidy Turley the same day, and Cassidy Turley immediately placed it in escrow.
That day or the next day (May 30 or May 31), Cassidy Turley representatives informed Wang by telephone that First Buyer had accepted his counteroffer. In the interim, however, Wang had spoken to his wife, and she opposed the sale. Wang, therefore, told the Cassidy Turley representatives he no longer wished to sell. They responded that it was too late, because there was a binding agreement.
The parties disagree on this point, and the precise timing is immaterial to our analysis.
Although, before the superior court, Wang initially suggested his wife had contributed to mortgage payments on the property, acquiring a community property interest in it, Buyers subsequently presented documentation indicating Wang purchased the property when he was single and transferred all rights to it to his personal living trust as separate property before he married. On appeal, Wang does not contend his wife had authority to prevent the sale.
On June 2, unaware of Wang's change of heart, Putnam deposited the amount specified in the agreement to the escrow holder. Later on the same date, First Buyer apparently received letters from Wang and his counsel advising that Wang no longer wished to sell. First Buyer responded through its counsel the same day with a letter insisting Wang adhere to the agreement or submit the matter to arbitration.
Three days later, on June 5, two Cassidy Turley representatives met with Wang, offering to reduce their commission from six percent of the purchase price to five percent if Wang would proceed with the sale, by providing all records related to the property and allowing access for an inspection as specified in the agreement. According to the declaration of one of those Cassidy Turley representatives, Steve Zirelli, Wang thanked the two men, said he was happy with the deal, set a date for the inspection, promised to assemble the requested records, and said he would notify the property tenants. Shortly after that meeting, Wang reportedly followed through, providing the requested records and allowing the inspection.
Wang does not dispute or even acknowledge plaintiff's account of this June 5 meeting.
On July 2, First Buyer assigned all of its rights to the property to Second Buyer. About three weeks later, on July 25, after Second Buyer reportedly had deposited all closing funds into escrow, it learned Wang had refused to sign the sale closing documents and was refusing to proceed with the sale. Buyers responded, on August 1, simultaneously filing a complaint for specific performance of the contract, and an application for orders compelling Wang to arbitrate and staying the action pending arbitration. Both documents attached copies of the agreement. After Wang filed an opposition to the application and Buyers submitted their reply, the superior court heard oral argument on September 19. Then, ruling from the bench, the superior court denied the application. Concluding there was a factual dispute about whether "the contract with [Wang's] changes was accepted by the other side [the First Buyer] and then delivered back to [Wang]," the superior court judge ruled Buyers had not met their burden of proving the existence of a valid contract. This timely appeal followed.
II. DISCUSSION
A. Relevant Legal Principles
"Code of Civil Procedure section 1281.2 . . . provides a procedure by which a party may petition the court to order arbitration of a controversy." (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 406.) The proceeding " ' "is in essence a suit in equity to compel specific performance of a contract." ' [Citations.]" (Id. at p. 411.) Under the statutory scheme, a trial court makes "a summary determination of the petition" in the manner provided for hearing and deciding motions generally. (Id. at pp. 407, 409.) Facts ordinarily "are to be proven by affidavit or declaration and documentary evidence, with oral testimony taken only in the court's discretion." (Id. at pp. 413-414.)
A party seeking to compel arbitration "bears the burden of proving [the] existence [of the agreement to arbitrate] by a preponderance of the evidence." (Rosenthal v. Great Western Fin. Securities Corp, supra, 14 Cal.4th at p. 413.) It may meet its burden by complying with the California Rules of Court, rule 3.1330 (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 765), which provides: "A petition to compel arbitration . . . pursuant to Code of Civil Procedure section[] 1281.2 . . . must state . . . the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference." (Cal. Rules of Court, rule 3.1330.) Once a petitioner alleges the existence of an arbitration agreement and supports the allegation as provided in rule 3.1330, the burden shifts to the party opposing the petition to prove "by a preponderance of the evidence[] any fact necessary to [its] defense" against enforcement of the agreement. (Rosenthal, supra, at p. 413 [a petition to compel arbitration must be "accompanied by prima facie evidence of a written agreement to arbitrate the controversy"].)
The Hotels Nevada decision referred to former rule 371, which was renumbered as rule 3.1330 and amended in 2007, without substantive change. (See Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 845, fn. 8.)
" 'There is no uniform standard of review for evaluating an order denying a motion to compel arbitration. [Citation.] If the court's order is based on a decision of fact, then we adopt a substantial evidence standard. [Citations.] Alternatively, if the court's denial rests solely on a decision of law, then a de novo standard of review is employed. [Citations.]' [Citation.]" (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 60.)
" 'We apply general California contract law to determine whether the parties formed a valid agreement to arbitrate. [Citations.]' [Citation.] When 'there is no evidence extrinsic to the contract or no conflict in the extrinsic evidence or the conflicting evidence is entirely written, a reviewing court is not bound by the finding of the trial court, but instead subjects the contract to independent review. [Citation.]' [Citation.]" (CPI Builders, Inc. v. Impco Technologies, Inc. (2001) 94 Cal.App.4th 1167, 1171-1172.)
B. Analysis
The superior court denied Buyers' application to compel arbitration, finding there was a factual dispute about whether First Buyer had effectively accepted Wang's counteroffer and communicated—or "delivered" news of—that acceptance back to Wang before Wang attempted to revoke it. But we see no factual dispute; the parties agreed on all of the following essential facts: Wang signed and initialed the agreement after writing in a higher purchase price; on behalf of First Buyer, Putnam accepted Wang's proposed price increase; Putnam communicated First Buyer's acceptance to the parties' dual agent, returning the signed and initialed agreement to the dual agent the same day; the dual agent informed Wang by telephone that First Buyer had accepted his counteroffer; and Wang then stated he no longer wished to sell. The parties' disagreement concerned the legal effect of this sequence of events. Specifically, the parties disputed whether First Buyer successfully communicated its acceptance of Wang's change(s)—that is, Wang's qualified acceptance or a counteroffer—before Wang attempted to rescind the proposal. (See, e.g., Landberg v. Landberg (1972) 24 Cal.App.3d 742, 750 [A qualified acceptance "is a new proposal or counteroffer which must be accepted by the former offeror . . . before a binding contract results"].) As this is a legal issue, our review is de novo. (Avery v. Integrated Healthcare Holdings, Inc., supra, 218 Cal.App.4th at p. 60.)
" ' "An essential element of any contract is the consent of the parties, or mutual assent." [Citation.]' " (Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 788.) " ' "Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings." [Citation.]' " (Ibid.) " 'Further, the consent of the parties to a contract must be communicated by each party to the other. [Citation.]' " (Ibid.) "If a proposal prescribes any conditions concerning the communication of its acceptance, the proposer is not bound unless they are conformed to; but in other cases any reasonable and usual mode may be adopted." (Civ. Code, § 1582.) Acceptance must "be communicated in a clear and unequivocal fashion. [Citation.]" (Gray v. Stewart (2002) 97 Cal.App.4th 1394, 1397.) If a proposal does not specify otherwise, an unequivocal oral acceptance will suffice. (Ibid.) "A proposal may be revoked at any time before its acceptance is communicated to the proposer, but not afterwards." (Civ. Code, § 1586; see, e.g., Bartone v. Taylor-Benson-Jones Co. (1953) 119 Cal.App.2d 79, 81 [the same rule applies for counter-offers].)
Wang concedes a Cassidy Turley representative orally informed him First Buyer had accepted his counteroffer before he attempted to revoke it. But Wang maintains that, under section 19.12 of the agreement, First Buyer could only communicate its acceptance by delivering back to him a fully executed copy of the revised written agreement, i.e., the accepted counteroffer. Section 19.12 provided in full as follows: "Acceptance: Buyer's signature hereon constitutes an offer to Seller to purchase the Property on the terms and conditions set forth herein. Unless acceptance hereof is made by Seller's execution of this Agreement and delivery of a fully executed copy to Buyer on or before 5:00 pm, June 3, 2014, this offer shall be null and void." (Italics added.) Other agreement provisions defined "Buyer" as "[First Buyer] or assignee" and "Seller" as "Luke Wang."
Wang acknowledges that section 19.12 only imposed an acceptance-related obligation on Seller (i.e., Wang). Wang nonetheless argues that, by leaving the provision unchanged when he revised the document to convey his counteroffer, the required method of acceptance also applied to Buyer, i.e., First Buyer could only communicate acceptance of the counteroffer by delivering to Wang the revised document containing Putnam's initials on the price change. As he had not received the document when he spoke with the dual agent's representative by telephone, Wang maintains, his revocation was timely and no final agreement was formed. Wang's argument ignores the plain language of the contract.
"The fundamental goal of contract interpretation is to give effect to the mutual intention of the parties as it existed at the time they entered into the contract. [Citation.]" (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1385.) If a contract's plain language "is unambiguous, a court may not 'read into' the document additional terms in order to conform its meaning to what the court's 'intuition' tells it the parties must have intended. Rather, the court 'is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted . . . .' [Citations.]" (PV Little Italy, LLC v. MetroWork Condominium Assn. (2012) 210 Cal.App.4th 132, 152; see also Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1073 [" '[W]e do not rewrite any provision of any contract, . . . for any purpose' "].) "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." (Civ. Code, § 1638; see also Frankel v. Board of Dental Examiners (1996) 46 Cal.App.4th 534, 545 [" '[I]mplied covenants are not favored in the law; and courts will declare the same to exist only when there is a satisfactory basis in the express contract of the parties which makes it necessary to imply certain duties and obligations in order to effect the purposes of the parties to the contract' "].) If Wang had intended to require that First Buyer adhere to the obligation stated in section 19.12 in accepting his counteroffer, he easily might have edited the provision as he did the proposed purchase price, inserting directions to that effect, for example, by changing the word "Seller" to "Buyer." As he did not do so, First Buyer remained free to communicate its acceptance in any reasonable manner, including orally.
Wang also cites sections 4.03 and 4.04 of the agreement as support for his contention that First Buyer could only communicate acceptance of his counteroffer in writing. Those sections defined the terms "Delivery" and "Notices" for purposes of the agreement. But section 19.12, which specifically addressed communication of acceptance, did not contain the term "notice," or incorporate by reference section 4.03, which specified that notices required under the agreement were to be "in writing." It only required that "Seller[]" (i.e., Wang) deliver acceptance in writing to First Buyer. Although the document elsewhere plainly contemplated the possibility of a counteroffer—and, indeed, specifically defined "Effective Date" as "the date of execution by the last party to sign [the] Agreement or counter offer(s)" (sec. 4.01, italics added)—it prescribed no obligations related to acceptance of counteroffers. Nor did Wang add any such requirement when he revised the document to present his counteroffer. The plain language of the agreement, therefore, does not support Wang's position.
Wang next contends that communicating acceptance of his counteroffer to the dual agent did not suffice. He cites section 19.12, observing that it required delivery to a party, and contained no reference to agents. He also cites sections 4.03 and 4.04, which directed that notices required under the agreement be delivered "to the parties at the locations set forth in [section] 19.06." (Italics added.) Section 19.06, in turn, advised that the parties' contact information could be obtained from their agent. None of these provisions, Wang observes, specifically authorized communication of acceptance through the dual agent.
While true, this ignores settled law that "[a] contract in writing takes effect upon its delivery to the party in whose favor it is made, or to his agent." (Civ. Code, § 1626, italics added; see also, e.g., Van't Rood v. County of Santa Clara (2003) 113 Cal.App.4th 549, 573 [" 'notice to an agent is notice to the principal' "]; Civ. Code, §2332 [same].) Indeed, as Buyers correctly note, all communications between the parties concerning this transaction had occurred through their dual agent. If Wang wished to require that acceptance of his counteroffer could only be communicated to him directly, he could have added such a provision to the agreement. Because he did not do so, First Buyer remained free to use "any reasonable and usual mode" of delivering its acceptance (Civ. Code, § 1582; Gray v. Stewart, supra, 97 Cal.App.4th at p. 1397), including communication through an agent (see, e.g., Commercial Cas. Ins. Co. v. Industrial Acc. Commission (1953) 116 Cal.App.2d 901, 908 [relaying acceptance through an agent qualifies as a "reasonable and usual" mode of communication]).
Wang also asserts, without citation to any legal authority, that, even absent a specific contractual requirement, written acceptance of his counteroffer was required as the only reasonable mode, and telephone communication did not suffice. He maintains that the dual agent presented the proposed agreement to him in writing, the counteroffer was presented to First Buyer in writing, and First Buyer, therefore, was obligated to communicate its acceptance of the counteroffer in writing as well. That is not the law. Absent a specific provision to the contrary in the proposed contract, acceptance may be communicated by "any reasonable and usual mode." (Civ. Code, § 1582, italics added; see, e.g., Hofer v. Young (1995) 38 Cal.App.4th 52, 56 [where a proposal sent by mail did not prescribe any mode of communicating an acceptance, communication of acceptance "by fax, a reasonable and increasingly common means of modern communication," sufficed].) As the telephone is a reasonable and common means of communication, and as Wang's counteroffer did not require otherwise, First Buyer was free to communicate—or deliver his acceptance—through the dual agent using that method.
Typically, a contract "must be considered as delivered if the parties understand [the contract] has been executed and is in operation." (Kaneko v. Okuda (1961) 195 Cal.App.2d 217, 228.) Here, both parties promptly demonstrated their understanding that an agreement was in operation. After Putnam accepted the counteroffer on May 30, the dual agent immediately delivered the executed document to escrow, and three days later, on June 2, Putnam deposited $105,000 to the escrow holder, as the agreement required. Wang then allowed Buyers to inspect the property as necessary for removal of their contingency, and provided Buyers with all records related to the property per the terms of the agreement. The parties' conduct demonstrated their understanding that they had reached agreement, thus confirming successful communication—or delivery—of the counteroffer's acceptance.
As Buyers successfully demonstrated the existence of a contract containing an arbitration agreement, they were entitled to an order compelling arbitration of the parties' dispute. (Code Civ. Proc., § 1281.2, subd. (a).)
Having reached this conclusion, we need not address Buyers' alternative argument that, in allowing inspection and providing records, Wang ratified the agreement and is estopped from contending otherwise. We also do not address Buyers' arguments on appeal responding to defenses Wang had asserted to the superior court (i.e., that he did not understand the purchase agreement was a contract and that his wife could rescind the contract). Wang concedes these points by offering no argument concerning them on appeal. (See In re Ramone R. (2005) 132 Cal.App.4th 1339, 1351.) --------
III. DISPOSITION
The order denying the application to compel arbitration is reversed. Appellants are awarded costs on appeal.
/s/_________
Rivera, J. We concur: /s/_________
Ruvolo, P.J. /s/_________
Streeter, J.