Valencia v. Mendoza

322 Cal.Rptr.3d 903

Miguel VALENCIA, Jr., et al., Plaintiffs and Respondents,

v.Armando MENDOZA et al., Defendants and Appellants.

B325803

Court of Appeal, Second District, Division 7.

Filed July 1, 2024

APPEAL from a judgment of the Superior Court of Los Angeles County, David Sotelo, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC723902)

Spierer, Woodward, Corbalis & Golberg, Stephen B. Goldberg, Redondo Beach, and Jeffrey Lewis for Defendants and Appellants.

Cohen & Cohen, Kerry A. Cohen and Barry L. Cohen for Plaintiffs and Respondents.

FEUER, J.

Armando Mendoza, Coastal Holdings, LLC, and Class A Realty, Inc. (collectively, the Mendoza defendants) appeal from a judgment entered after the trial court confirmed an arbitration award in favor of Miguel Valencia, Jr., and Lizette Valencia on the Valencias’ claims in connection with undisclosed defects in a home they purchased from the Mendoza defendants. On appeal, the Mendoza defendants contend the court erred in denying their petition to vacate the arbitration award and granting the Valencias’ petition to confirm the award after finding the petition to vacate was untimely. The Mendoza defendants also contend the arbitrator committed legal error—reviewable under the parties’ arbitration agreement—when the arbitrator excluded key evidence from the arbitration hearing.

The trial court correctly found that the Mendoza defendants’ petition to vacate the arbitration award was untimely under Code of Civil Procedure section 1290.6¹ because it was filed more than 10 days after service of the Valencias’ petition to confirm the arbitration award. The fact the petition to vacate complied with the deadline under section 1288 to file the petition within 100 days of service of a signed copy of the arbitration award does not excuse the failure to meet the 10-day deadline to respond to the petition to confirm the award—a response seeking vacation of the arbitration award was required to comply with both. Although the court had discretion to extend the deadline under section 1290.6 for good cause, it did not abuse its discretion in finding no good cause. We therefore consider whether the Mendoza defendants met their burden to show the arbitrator erred in its rulings excluding evidence by reviewing the Mendoza defendants’ initial opposition to the petition to confirm the arbitration award, without considering the declarations they later filed with their untimely petition to vacate. They did not meet their burden, and we affirm.

BACKGROUND AND PROCEDURAL HISTORY

A. The Valencias' Home Purchase²

In August 2016 the Valencias purchased a house on South Harbor View Drive in San Pedro (the home) from Coastal Holdings, a company wholly owned and controlled by Mendoza. Mendoza’s broker in the transaction was Class A Realty; Mendoza owned 50 percent of Class A Realty, and his fiancée owned the other 50 percent. The Valencias were attracted to the home because it appeared to be in move-in condition.

Mendoza had purchased the home several months earlier from Fillipo Tranni with the intention to "flip"³ the home for resale. Tranni had lived in the home for many years and started a major renovation: Tranni had hired an architect, obtained some permits, and begun demolition work when he realized the renovation was too complicated, and he decided instead to sell the home. In selling the home to Mendoza, Tranni disclosed that work had been done without necessary permits, and it was not in compliance with building codes. Tranni also disclosed the home had other issues, including water intrusion, stucco that was chipping, and improperly installed windows.

Mendoza was an experienced house flipper, having flipped 50 to 60 houses in the past. Mendoza hired Pablo Rivas and Carlos Navarro to perform construction work to finish Tranni’s renovation and allow resale as soon as possible. Mendoza identified himself as the "owner/builder" on applications for the building permits he believed necessary for the job; his selfidentification as the owner/builder required that all work be done by licensed contractors. Mendoza, Rivas, and Navarro were not licensed contractors. Further, a significant amount of work was completed before Mendoza obtained permits, so when the building inspector came to the site for a code inspection, the inspector could not see the prior work and whether it complied with building codes. Other work was entirely unpermitted. When Mendoza sold the home to the Valencias, he did not disclose the issues previously disclosed by Tranni, nor did he disclose that he did unpermitted work using unlicensed contractors. When he listed the property for sale, he described it as " ‘completely remodeled’ " with " ‘no expense spared.’ "

Shortly after the Valencias purchased the home and moved in, problems arose. After the first rain, water poured in around the windows installed by Mendoza. While unsuccessful attempts to remedy the leak and repair the damage were underway, numerous other defects became apparent. It was necessary for the Valencias to move out of the home for several months while extensive repairs were made.

B. The Arbitration and Award

On October 2, 2018 the Valencias filed this action against the Mendoza defen- dants, asserting 10 causes of action based on fraudulent concealment of defects in the home.⁴ After the Mendoza defendants moved to compel arbitration, the parties agreed to a stipulation for binding arbitration and a stay of the court action, which the trial court approved and entered on January 25, 2019. Paragraph 8 of the parties’ stipulation provided for enhanced judicial review of the arbitration award pursuant to Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 82 Cal.Rptr.3d 229, 190 P.3d 586 (Cable Connection). The agreement stated, "[T]he Arbitrator shall apply California substantive law to the proceeding, The arbitrator shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error. It is the explicit and unambiguous intent of the parties that any error of law or legal reasoning shall be an act in excess of the arbitrator’s powers that is reviewable on appeal. Specifically, any party may seek to vacate any award that has been made in excess of the Arbitrator’s powers, as provided for in [§ 1286.2], with a concomitant right of appeal to a court of competent jurisdiction."

The Valencias asserted eight claims in the arbitration against one or more of the Mendoza defendants: (1) violation of state contractor licensing laws (Bus. & Prof. Code, § 7028; Code Civ. Proc., § 1029.8); (2) breach of contract; (3) breach of statutory duty of disclosure (Civ. Code, § 1102); (4) fraud; (5) negligent misrepresentation; (6) negligence; (7) violation of the common law duty of disclosure; and (8) fraudulent concealment (Civ. Code, § 2079). There was extensive pre-hearing discovery, including hundreds of written discovery requests and 17 depositions.

The arbitration hearing was held over five days in June 2021 before Judith C. Chirlin, a retired superior court judge. Twelve witnesses testified, including three engineers who testified as retained experts on building code requirements and damages: William McKee Nelson and David Stern (for the Valencias) and Bryce Dean Richmond (for the Mendoza defendants). At the conclusion of witness testimony, the parties submitted closing briefs and separate briefing on damages.

On August 23, 2022 the arbitrator issued a 17-page final arbitration award (award).⁵ The arbitrator found the Valencias’ causes of action fell into two main categories, negligence and failure to disclose, and multiple Mendoza defendants were liable in each category. The arbitrator awarded $432,536 in monetary damages, including $130,000 for repairs; $260,000 for impairment to the fair market value of the home due to the defects; and smaller amounts for loss of use, statutory penalties, and inspection fees.⁶ Finding by clear and convincing evidence that Mendoza "made false representations and failed to disclose known defects with knowledge of the falsity" and "intended to defraud the Valencias," the arbitrator awarded $438,800 in punitive damages. The arbitrator also awarded $364,544 in attorneys’ fees and $52,667 in costs, plus prejudgment interest.

C. Confirmation of the Award

1. The Valencias’ petition to confirm the award

On September 2, 2022 the Valencias filed a petition to confirm the arbitration award, setting a September 28, 2022 hearing date. The petition attached the home purchase agreement, the stipulation to arbitrate, and the arbitration award. The Valencias did not file any declarations or additional evidence.

On September 14 the Mendoza defendants filed a four-page opposition.⁷ In an introductory paragraph, the Mendoza defendants stated they were "in the process of completing drafting" a petition to vacate that would "likely be filed within the next 10-15 days." They had reserved a hearing date in April 2023 and requested the court continue the Valencias’ petition to confirm so that it would be heard with their petition to vacate.

The Mendoza defendants in their opposition argued the arbitrator’s refusal to consider two items of critical evidence constituted grounds to vacate the award.⁸ First, the arbitrator excluded a building inspection card that on its back "included a statement by the inspector, " ‘OK to close walls.’ " As described in the opposition, the building inspector testified at the hearing that he was unable to see the work done by the Mendoza defendants before the walls were closed, and the arbitrator made a finding in the award that "[a] significant amount of the work done by [the Mendoza defendants] was done before Mr. Mendoza pulled permits so that when the City Building Inspector came to inspect, he could not see the work and whether it had been done correctly and in accordance with the Building Codes." The...