Opinion
B334792
11-26-2024
MARK LANGE, Plaintiff and Respondent, v. SANDRA HANOVER EBNER et al., Defendants and Appellants.
Milman Law and Rachel S. Milman; Benedon & Serlin, Mark Schaeffer and Kelly R. Horwitz for Defendants and Appellants. Lang, Hanigan & Carvalho and Timothy R. Hanigan for Plaintiff and Respondent.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. 23SMCV01196, Edward B. Moreton, Jr., Judge. Reversed.
Milman Law and Rachel S. Milman; Benedon & Serlin, Mark Schaeffer and Kelly R. Horwitz for Defendants and Appellants.
Lang, Hanigan & Carvalho and Timothy R. Hanigan for Plaintiff and Respondent.
MOOR, J.
Defendants and appellants Sandra Hanover Ebner and Stephen Ebner, individually and as trustees of the Ebner and Hanover Trust (collectively the Ebners), appeal from an order denying a motion to compel arbitration in favor of plaintiff and respondent Mark Lange in this action arising out of a real estate transaction. The Ebners contend Lange's tort claims for misrepresentation and nondisclosure of material facts are subject to arbitration because they "arise out of" the purchase agreement and resulting transaction. We agree, and therefore, we reverse with directions.
FACTUAL AND PROCEDURAL BACKGROUND
A. Allegations of the Complaint
On March 17, 2023, Lange filed a complaint against the Ebners alleging claims for misrepresentation and nondisclosure as follows. On May 18, 2019, Lange purchased vacant real property in Malibu from the Ebners. The property had two septic tank systems. Lange asked about the operating condition of the systems at the time of the purchase. The Ebners told their real estate agent Cormac O'Herlihy that in March 2019, they contacted Mosser Plumbing to look into an inspection of the septic tank systems. Mosser did preliminary work for an inspection, but the Ebners decided not to build on the property and to sell it instead, so they did not go forward with an inspection. The tank was pumped. They attached the invoice for the pumping and the estimate from Mosser for costs related to an inspection. The Ebners' agent relayed the information to Lange's real estate agent. Lange believed the Ebners made these statements to their agent with the intent that they would be repeated to Lange, and the statements were knowingly false or made negligently.
In fact, the Ebners retained Mosser in April 2019 to conduct an inspection. Mosser provided a written report concluding the conventional septic system was not compliant with the city's standards because of the slow drainage of the seepage pit that was water tested. Mosser recommended hiring a civil engineer to design a new system which would require a treatment tank and disinfection components.
Lange was not given a copy of Mosser's report by the Ebners, nor was he advised of the defective condition of the septic tank system as had been disclosed in the report. The Ebners intentionally or negligently failed to disclose the condition of the septic tank system and the existence of the Mosser report. Lange reasonably relied on the Ebners' statement that they had not conducted an inspection of the septic tank system, which was made with the intent for Lange to rely on it, when he purchased the property.
Lange first discovered the existence of the Mosser report and the defects associated with the septic tank system in September 2019, when he received an email from Mosser attaching a copy of the report. Had Lange known the septic system was not compliant and needed redesigning, he would not have purchased the property. As a result, Lange has been damaged in an amount not less than $250,000.
Lange attached the parties' purchase agreement. The seller was listed as "Ebner and Hanover Ebner Trust." Among the items included in the sale were: "All plans, permits, reports and property info in sellers['] possession." The arbitration provisions of the purchase agreement stated, "The Parties agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration." The agreement excluded from arbitration any matters related to foreclosure, unlawful detainer, or subject to the jurisdiction of a probate, small claims, or bankruptcy court. The agreement also stated, "Enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act."
B. Motion to Compel Arbitration
On August 28, 2023, the Ebners filed a motion to compel arbitration and stay the action based on the arbitration provision of the purchase agreement. In opposition, Lange noted that the purchase agreement was between Lange and the Ebner and Hanover Trust, and that the trust was the seller. Lange argued the motion should be denied as to the Ebners individually, because they were not parties to the purchase agreement.
In reply, the Ebners noted that Lange did not argue the dispute was not subject to the arbitration provision of the contract, only that the arbitration agreement did not apply to the individual defendants. The Ebners argued there were no separate claims against the individual defendants and Lange was equitably estopped from avoiding arbitration by suing nonsignatory defendants for claims that were based on the same facts and inherently inseparable from the arbitrable claims against signatory defendants.
A hearing was held on the motion to compel arbitration and the trial court took the matter under submission. On October 24, 2023, the trial court issued a minute order denying the motion to compel arbitration. The court concluded that the arbitration agreement did not encompass tort claims, even though Lange had opposed the motion on different grounds. An arbitration provision that uses a phrase like "in connection with" or "relating to" extends the scope of an arbitration provide to include tort claims that stemmed from the relationship between the parties created by the contract, but an arbitration provision that used only a phrase like "arising out of" or "arising from" was narrower and extended only to disputes related to interpretation and performance of the agreement. Because Lange alleged only tort claims, the claims were not subject to arbitration under the parties' agreement. The Ebners filed a timely notice of appeal.
DISCUSSION
A. Interpretation of Arbitration Provision
The Ebners contend Lange's tort claims are covered by the arbitration provision because they arose out of the purchase agreement or the resulting transaction. We agree.
The parties agreed to arbitrate "any dispute or claim . . . arising . . . out of this Agreement, or any resulting transaction." When there is no dispute about the language of the arbitration clause and no conflicting extrinsic evidence concerning the terms, we review an order granting or denying a motion to compel arbitration de novo. (Rice v. Downs (2016) 248 Cal.App.4th 175, 185 (Rice).)" 'We are not bound by the trial court's construction or interpretation.' [Citation.]" (Ibid.)
"The ordinary rules of contract interpretation apply to arbitration agreements. [Citation.] 'The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made (Civ. Code, §§ 1636, 1644, 1647).' [Citation.] 'The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.' (Civ. Code, § 1641.)" (Rice, supra, 248 Cal.App.4th at pp. 185-186.)
The language" '[a]ny dispute or . . . disagreement'" extends beyond contract claims to include tort claims. (EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1322 (EFund).) The question is whether the claims alleged in the complaint can reasonably be characterized as "arising out of" the agreement or the resulting transaction.
We conclude Lange's claims for misrepresentation and nondisclosure based on the Ebners' alleged failure to disclose the condition of the septic tank system arose out of the parties' transaction, as Lange conceded at oral argument. Many courts have interpreted similar contract language to include tort claims for misrepresentation and nondisclosure. (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 356 [provision of real estate purchase agreement requiring arbitration of "any dispute or claim . . . arising . . . out of this Agreement or any resulting transaction" included tort claims alleging misrepresentation and nondisclosure of construction defects]; EFund, supra, 150 Cal.App.4th at p. 1317 [agreement to arbitrate "[a]ny dispute or other disagreement arising from or out of this Consulting Agreement ...." included tort claims for fraudulent inducement and interference with contract]; Berman v. Dean Witter &Co., Inc. (1975) 44 Cal.App.3d 999, 1002-1003 [agreement to arbitrate" '[a]ny controversy . . . arising out of or relating to this contract'" was broad enough to embrace tort claims with roots in parties' contractual relationship]; Cf. Santisas v. Goodin (1998) 17 Cal.4th 599, 603 [attorney fee provision in real estate purchase agreement covering claims" 'arising out of the execution of this agreement or the sale'" included tort claims for negligence, deceit, misrepresentation, and nondisclosure].)
Lange's claims against the Ebners arise from their alleged representations about the property to induce the sale and nondisclosure of material information in the purchase agreement. The Ebners' duty to reveal material information about the property arose out of the purchase agreement; they did not have a separate, independent duty outside of the agreement. Moreover, the parties' agreement requires arbitration if the dispute or claim arises out of the agreement or any resulting transaction. Lange's claims for misrepresentation and nondisclosure clearly arise out of the transaction, and therefore, are subject to arbitration under the parties' agreement. The order denying the motion to compel arbitration must be reversed.
The decision in Rice, relied on by the trial court and Lange, is distinguishable. In Rice, the parties agreed to arbitrate any controversy "arising out of" an operating agreement for a jointly owned business, but they agreed to jurisdiction in California in any action "arising out of, under or in connection with" the agreement. (Rice, supra, 248 Cal.App.4th at p. 180.) To give meaning to the different terms used in the parties' agreement, the Rice court found the parties intended the arbitration provision to apply to a more limited range of controversies than the jurisdiction provision. (Id. at p. 190.) There are no comparable differences in the provisions of the agreement in the present case.
We note that the Rice court still went on to analyze whether the tort claims alleged in that case arose out of the parties' agreement. The court suggested the provision was broad enough to encompass tort claims arising from the agreement, but concluded the claims in that case arose out of the parties' preexisting attorney-client relationship, based on independent duties or rights originating outside of the agreement, and therefore, were not covered by the arbitration agreement. (Rice, supra, 248 Cal.App.4th at pp. 190-191.)
B. Standing
Because the trial court found the arbitration provision did not cover the claims in this case, it did not rule on Lange's argument that the Ebners could not enforce the arbitration agreement in their individual capacity because they were not signatories to the agreement. The case must be remanded to the trial court for determination of the standing issue. (See EFund, supra, 150 Cal.App.4th at p. 1330.)
DISPOSITION
The October 24, 2023 order denying the motion to compel arbitration is reversed. Appellants Sandra Hanover Ebner and Stephen Ebner, individually and as trustees of the Ebner and Hanover Trust, are awarded their costs on appeal. Upon issuance of the remittitur, the trial court is to consider whether the Ebners in their individual capacities have standing to invoke the arbitration provision.
WE CONCUR: BAKER, Acting, P. J., DAVIS, J. [*]
[*] Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.