Opinion
A148372
12-20-2016
HAYWARD RENAISSANCE WALK CORPORATION, Plaintiff and Appellant, v. OLSON URBAN HOUSING, LLC, 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG16802662)
Appellant Hayward Renaissance Walk Corporation (association), a homeowners association, filed a petition to compel arbitration of a dispute over alleged construction defects. The parties agreed they were required to proceed by way of binding arbitration, but they disagreed as to which of two arbitration clauses applied to their dispute. In ruling on the petition to compel arbitration, the trial court found applicable the arbitration clause disfavored by the association and directed it to file a demand for arbitration pursuant to that clause. When the association failed to do so, the court denied the petition to compel. Because we find the trial court's order denying the petition to be a nonappealable order, we dismiss the appeal.
I. BACKGROUND
The association is a nonprofit corporation composed of the owners of 46 units of a real estate development known as Hayward Renaissance Walk (property). In February 2016, the association filed an action against various persons and entities involved in the construction of the property (defendants), alleging defects in construction of the property. The complaint contains seven causes of action, including claims for negligence, strict liability, breach of implied warranty, and breach of contract.
A week after filing suit, the association filed a petition for an order staying its action and compelling arbitration (petition). The petition was premised on article VI, section 14 (hereafter section 14) of the property's declaration of covenants, conditions and restrictions (CC&R's), which states as follows: "Unless otherwise required by the Limited Warranty for matters and issues governed by the Limited Warranty, any and all claims, controversies, breaches or disputes . . . between or among [persons involved in construction and development of the property] and/or any Owner, relating to or arising out of the Project . . . shall be resolved amicably and without the necessity of time consuming and costly litigation through arbitration pursuant to the Federal Arbitration Act and subject to the procedures set forth in this Section 14." Subdivision (c) of section 14, entitled "Binding Arbitration," states: "In the event that a Dispute is raised and not resolved by the nonadversarial procedures noted above . . . or as otherwise . . . required by the Limited Warranty, such Dispute shall be submitted to binding Arbitration by and pursuant to the rules of CAS [(Construction Arbitration Services)] in effect at the time of the initiation of the arbitration." In its petition, the association sought an order requiring the arbitration to proceed under the auspices of CAS, pursuant to section 14, subdivision (c).
As the above quotations suggest, the CC&R's contain an alternate source for the authority to arbitrate. Attached as exhibit F to the CC&R's is a document entitled, "Home Builder's Limited Warranty" (limited warranty). By its terms, the limited warranty is intended to "establish[] an agreed method for determining when a construction defect exists and a clear understanding of [the builder's] responsibilities for remedying any such construction defect" and authorizes the association and its members to initiate binding arbitration to determine whether a construction defect exists. Section VIII of the limited warranty defines "[d]isputes subject to binding arbitration" to include "[a]ny allegation" of negligence, fraud, strict liability, or breach of implied warranty, and "[a]ny other claim arising out of or relating to the sale, design or construction of your home." Under the arbitration procedures specified in the limited warranty, the arbitrator is to be selected by Professional Warranty Service Corporation, the entity "which administers the warranty program in which [the builder] participate[s]."
In opposing the petition, defendants initially argued the association had failed to support the petition with admissible evidence. After the association remedied this deficiency in its reply papers, defendants objected, among other grounds, that the association had not proceeded under the provisions of the limited warranty. At argument on the petition, defendants made clear their position that the association must "comply with the procedures that were set forth in the limited warranty." The association, in turn, contended that proceeding under the provisions of the limited warranty was optional and declined to do so.
After the submission of supplemental briefs addressing the competing arbitration clauses, the trial court entered an extensive written order granting arbitration, although not under section 14. As the court noted, "The parties now agree that their dispute is subject to binding arbitration; they disagree as to which provisions of the CC&R control and, thus, who is empowered to select the arbitrator." The trial court concluded the provisions of the limited warranty govern the association's claims, noting the broad language in the limited warranty making its arbitration provisions applicable to claims regarding the design and construction of the property and rejecting various arguments raised by the association in support of its contention that section 14 applies. The trial court then noted that a precursor to arbitration under the limited warranty is the submission of a demand for arbitration pursuant to its terms. The court granted the association 14 days in which to submit a demand for arbitration under the limited warranty and provided that the petition would be denied in the event the association failed to comply. When the association failed to submit proof of a timely demand, the court denied the petition for that reason.
II. DISCUSSION
The association contends the trial court erred in ruling the limited warranty, rather than section 14 of the CC&R's, governs the arbitration of its claims. We do not reach the issue because we agree with defendants that the trial court's order denying the petition is not an appealable order.
The right to appeal is dictated by statute. (Vivid Video, Inc. v. Playboy Entertainment Group, Inc. (2007) 147 Cal.App.4th 434, 440 (Vivid Video).) In general, an appeal may only be taken from a final judgment (Sullivan v. Delta Air Lines, Inc. (1997) 15 Cal.4th 288, 307, 308), defined as a judgment that " ' " 'terminates the litigation between the parties on the merits of the case and leaves nothing to be done but to enforce by execution what has been determined.' " ' " (Dana Point Safe Harbor Collective v. Superior Court (2010) 51 Cal.4th 1, 5.)
Although arbitration under both clauses is governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.), California procedural law determines the appealability of the trial court's order. (Judge v. Nijjar Realty, Inc. (2014) 232 Cal.App.4th 619, 632 (Nijjar Realty).)
The appeal of arbitration rulings is governed by Code of Civil Procedure section 1294. In addition to authorizing appeal from judgments entered on an arbitration award, section 1294 permits an appeal from orders (a) denying a petition to compel arbitration; (b) dismissing a petition to confirm or vacate an award; and (c) vacating an award, so long as the vacating order does not require a rehearing in arbitration. What each of these appealable orders has in common is that they effectively terminate further proceedings with respect to the arbitration. As the court observed in Long Beach Iron Works, Inc. v. International Molders etc. of North America, Local 374 (1972) 26 Cal.App.3d 657, "It is quite obvious that the Legislature's philosophy and intent in drafting section 1294 was that there should be no appellate consideration of intermediate rulings in arbitration disputes if the superior court was of the view that there should be initial or further proceedings in arbitration. Thus, most significantly, an order compelling arbitration is not appealable. [Citation.] Similarly the Legislature expressly excepted orders vacating awards but direct[ing] rehearings in arbitration from a roster of appealable rulings in section 1294." (Id. at p. 659.)
Code of Civil Procedure section 1294 states: "An aggrieved party may appeal from: [¶] (a) An order dismissing or denying a petition to compel arbitration. [¶] (b) An order dismissing a petition to confirm, correct or vacate an award. [¶] (c) An order vacating an award unless a rehearing in arbitration is ordered. [¶] (d) A judgment entered pursuant to this title. [¶] (e) A special order after final judgment." --------
In determining whether an order falling within one of the categories of appealable orders listed in Code of Civil Procedure section 1294 is actually appealable, we are required to consider the substance and effect of the order, rather than its form. (Nijjar Realty, supra, 232 Cal.App.4th 619, 628.) An order denying or dismissing a document entitled "petition to compel arbitration," for example, is not appealable solely because of its title. (E.g., Vivid Video, supra, 147 Cal.App.4th at p. 442 [finding order denying petition to compel arbitration process nonappealable]; State Farm Fire & Casualty v. Hardin (1989) 211 Cal.App.3d 501, 507 (Hardin) [same].) Rather, such an order is appealable only if it truly terminates a party's efforts to compel proceedings in arbitration. (Nijjar Realty, at p. 634 [finality requirement applies to orders listed in § 1294]; Vivid Video, at p. 443.) As Hardin explained the rationale for this principle, a ruling that anticipates further arbitration proceedings can be reviewed once the arbitration is complete. To permit the interlocutory appeal of such an order " 'would delay and defeat the purposes of the arbitration statute.' " (Hardin, at p. 506.)
There are two ready examples. In Hardin, the homeowners' insurance policy included a formal appraisal procedure to resolve disputes about the cost of fire damage. In the course of informal discussions about the repair of a fire-damaged home, the insurer and the homeowners exchanged cost estimates. When the parties could not agree on the items of damage to be reimbursed, the insurer filed a petition to invoke the appraisal procedure. The homeowners filed a cross-petition, which they characterized as a petition to compel arbitration, arguing the appraisal procedure should address only the items to be reimbursed in addition to those included in the insurer's estimate, since the homeowners agreed that those items should be reimbursed. (Hardin, supra, 211 Cal.App.3d at pp. 503-505.) The trial court denied the homeowners' cross-petition because it accepted the insurer's position that the appraisal procedure should be conducted without regard to the informal discussions. (Id. at p. 505.) Notwithstanding the court's denial of a petition to compel, the Court of Appeal found the order nonappealable because the appraisal process, to which the homeowners did not object, would proceed regardless of the denial of their cross-petition. (Id. at p. 506.) The court noted that the homeowners' cross-petition was more accurately characterized as a petition to exclude certain items from the appraisal process and reasoned that the net effect of the trial court's decision was to compel arbitration of the entire loss. (Id. at p. 507.)
In a similar vein is Vivid Video, supra, 147 Cal.App.4th 434, in which the arbitration agreements between the parties applied only to specific types of disputes. (Id. at pp. 437-438.) After the plaintiffs filed an action containing a variety of causes of action that were not necessarily covered by the arbitration clauses, the defendants filed a petition, again characterized as a petition to compel arbitration, seeking a declaration that, under the applicable agreements, the arbitrator, rather than the court, had the authority to decide what issues were arbitrable. (Id. at p. 439.) Despite its title, the petition did not actually seek an order requiring arbitration, nor did it seek the court's resolution of the issue of which causes of action were arbitrable, in the event that issue was found to be reserved for the court. The trial court denied the petition to compel, finding that the agreements required the court to resolve issues of arbitrability. (Id. at p. 440.) Using much the same reasoning as Hardin, the Court of Appeal found that order nonappealable, characterizing the issue as whether a ruling "as to who decides arbitrability is a final determination giving rise to a right to appeal." (Vivid Video, at p. 440.) The court began with the premise that, "[u]nder [Code of Civil Procedure] section 1294, appealable arbitration orders require finality. . . . An intermediate ruling in an arbitration dispute that contemplates further proceedings in arbitration is not appealable." (Id. at p. 442.) Because the order denying the defendants' petition to compel arbitration "merely determines who decides arbitrability for purposes of further proceedings in the trial court as to what issues are arbitrable," the court concluded it was "not sufficiently final to give rise to a right to appeal." (Id. at p. 443.)
Like the orders in Hardin and Vivid Video, the denial of the association's petition to compel arbitration did not resolve all issues concerning arbitration of the parties' dispute. Rather than seeking arbitration in general, the association's petition sought only to compel arbitration under section 14 of the CC&R's. When the trial court denied the petition upon concluding the association was not entitled to arbitration under section 14, it did not rule that arbitration was unavailable to the association. On the contrary, the trial court's ruling expressly noted that arbitration could occur under the limited warranty. The court presumably refrained from ordering such arbitration only because the association, by failing to demand arbitration under the limited warranty, had not expressed a present interest in such an arbitration.
Regardless of the association's failure to take advantage of the trial court's offer of limited warranty arbitration, it is clear that the court's denial of the petition to compel "contemplates further proceedings in arbitration" and is therefore nonappealable. (Vivid Video, supra, 147 Cal.App.4th at p. 442.) On the first page of its opening brief, the association acknowledges, "The parties do not dispute that the claims are subject to arbitration, but rather which arbitration clause . . . applies." If we were to find the trial court's order appealable and affirm it, the association would presumably relent and file a demand for arbitration under the limited warranty. On the other hand, if we were to reverse, the association would presumably seek an order from the trial court compelling arbitration under section 14. Either way, an arbitration will still happen. Because that is true, the trial court's order is insufficiently final to be appealable.
III. DISPOSITION
The appeal is dismissed. Defendants may recover their costs on appeal. (Cal. Rules of Court, rule 8.278, subds. (a)(1), (2).)
/s/_________
Margulies, J. We concur: /s/_________
Humes, P.J. /s/_________
Dondero, J.