IKOLA, J.
This is an appeal from an order denying a motion to compel arbitration. Plaintiff Talega Village Center Community Association (HOA) is a homeowners association, which previously sued the builder of the community for construction defects. The builder moved to compel arbitration, and in a prior opinion, we held the arbitration agreement was not enforceable because there was no evidence the warranty containing the arbitration provision had issued, which was a condition precedent to it becoming effective. In that opinion, however, we were careful to limit our holding to the proposition that the builder had failed to provide an adequate record, and we left open the possibility that the arbitration provision may be enforceable in the future under a better evidentiary showing. (Talega Village Center Community Assoc. v. Superior Court (May 18, 2016, G051950) [nonpub. opn.] (Talega I).)
The HOA has now sued defendant Professional Warranty Corporation (Professional Warranty), which is the designated administrator of the warranty that contains the arbitration provision. The first, second, and fifth cause of action in the operative second amended complaint are asserted against Professional Warranty. The first cause of action is labeled "Unlawful, Unfair and Fraudulent Business Acts and Practices" (Bus. & Prof. Code, §§ 17200 et seq.); the second cause of action is labeled "Violation of the Racketeer Influence and Corrupt Organizations Act" (18 U.S.C. § 1961 et seq.); and the fifth cause of action is simply for "Declaratory Relief." Despite the various labels, the gist of the second amended complaint is that the warranty and arbitration scheme set forth in the home warranty is so one-sided that it amounts to a fraudulent attempt to deprive the homeowners of their statutory rights. The legal sufficiency of the complaint has not yet been tested, as this appeal was filed prior to the court ruling on a pending demurrer.
We conclude, once again, that issuance of the warranty to the HOA was a condition precedent to the arbitration provisions becoming a binding agreement. And while Professional Warranty presented evidence that some homeowners may have been issued a warranty, there was no evidence the HOA was issued a warranty, which was a requirement under the covenants, conditions, and restrictions (CC&R's). In other words, no agreement to arbitrate between Professional Warranty and the HOA ever formed. Accordingly, we affirm.
The HOA is the homeowner's association for the residential condominium development known as Talega Village Center in San Clemente. The development consists of both residential units and common area. The development is governed by a declaration of the CC&R's that contain certain warranties and alternative dispute resolution (ADR) procedures. In particular, the CC&R's attach a sample of a home builder's limited warranty (Builder Warranty), which is the document at issue here. The Builder Warranty contains provisions that apply to individual homes (Home Warranty), and other provisions that apply to association property (Association Property Warranty). Professional Warranty is the warranty administrator for the Builder Warranty, including its ADR provisions.
The HOA alleges that defendants intentionally drafted the CC&R's "to mislead prospective buyers into believing that they had certain rights and protections under California law which [the builder] never intended to honor and intended at all relevant times to divest these owners of these protections utilizing a system of misleading covenants, conditions and restrictions and conspiring with agents and business affiliates to deprive these consumers of protections otherwise afforded [to] them under the law."
The warranty provisions impose broad waivers of all expressed or implied warranties. They also waive "the right to seek damages or other legal or equitable remedies . . . under any other common law or statutory theory of liability, including but not limited to negligence and strict liability. Your only remedy in the event of a construction defect in or to the home or the common elements or to the real property on which the home or the common elements is situated is the coverage provided to you under this limited warranty. Notwithstanding the foregoing, nothing in this limited warranty shall diminish any rights, obligations, or remedies that you or we may have under California Civil Code Sections 895 through 945.5 or under any procedures adopted in place of California Civil Code sections 910 through 938." (Capitalization and bolding of defined terms omitted.)
The ADR provisions of the CC&R's designate the Builder Warranty as the primary dispute resolution mechanism. The Builder Warranty provides that any disputes between the HOA and Professional Warranty "related to or arising from" the warranty shall be resolved by arbitration. This includes "[a]ny alleged violation of consumer protection, unfair trade practice, or any other statute." Professional Warranty is given the right to select the arbitrator at its sole discretion. For construction defect claims, the builder reserves the right to elect between the following remedies: repair, payment of the amount it would cost the builder to repair, or payment equal to the diminution in fair market value.
The HOA alleges these provisions amounted to "a scheme to mislead prospective purchasers and interfere or if possible divest consumers of the protections afforded consumers and their representative association under
The HOA further alleges the builder intentionally did not issue the Builder Warranty, which, as we noted in our prior opinion, prevents the warranty from coming into effect. Nonetheless, the HOA alleges the builder tried to assert rights under the warranty that they knew were unenforceable. In particular, the builder met with homeowners urging that they be allowed to enter common areas to make repairs pursuant to the warranty. The builder also offered to pay the legal fees of any homeowner who was sued for allowing it onto common area. The builder made repairs to common areas, and instituted a "claim" under the Builder Warranty.
The HOA filed the present lawsuit in April 2015. Defendants demurred, but the court stayed litigation pending the decision in the related appeal. (Talega I, supra, G051950.) That case involved a construction defect claim between the HOA and the builder. The builder moved for arbitration and the court granted the motion. We issued a writ of mandate directing the trial court to vacate its order, concluding there was no evidence the Builder Warranty had issued, which was a condition precedent to the agreement coming into effect.
Once the stay was lifted, the HOA filed a first amended complaint, which Professional Warranty answered. Professional Warranty then moved to compel arbitration based on the same arbitration provision we interpreted in our prior opinion. Our prior opinion did not preclude that motion, as we included the following footnote: "Our conclusion that the home warranty did not issue applies only to the present petition to compel arbitration. In addition to the arbitration provisions, the home warranty contains limitations on liability that defendants may wish to enforce in a future arbitration in this case. For purposes of enforcing those limitations on liability, nothing about our opinion would preclude defendants from presenting evidence that the home warranty, in fact, did issue. In other words, our conclusion is only that there is no evidence in the record before us that the home warranty issued. That said, we offer no opinion on whether those limitations on liability are ultimately enforceable." (Talega I, supra, G051950.) In its motion, Professional Warranty sought to fill that evidentiary gap.
First, Professional Warranty included Builder Warranty registration forms for 294 of the 302 units in the Talega development. Each registration form contained the following statement, signed by the homeowner(s): "I/we have received, reviewed, understand and agree to the terms of the Home Builder's Limited Warranty (`Limited Warranty') document (PWC Form #117). I/we acknowledge that the Builder does not make any representations as to its Limited Warranty that contradict or are inconsistent with the terms and conditions stated in its Limited Warranty."
Additionally, Professional Warranty included warranty validation forms for each of the 294 units that had submitted registration forms. The vice-president and general counsel of Professional Warranty declared that these forms were generated and sent to the homeowners shortly after receiving the completed registration form. The forms reflected a warranty issuance date of June 3, 2016 (well after the present lawsuit had been filed, and two and one-half months after our opinion in the prior lawsuit was filed), but inconsistently listed the warranty period as running from 2003-2013. The forms also listed the dollar limit of liability, and included a section entitled "Forms Attached as Warranty Issuance," which listed a "booklet" entitled "117 CA 01/03." The general counsel declared that Professional Warranty "would have, in the ordinary course of business, mailed to the homebuyers copies of the PWC Validation Form and the warranty booklet referenced therein. . . ." "Based on the warranty validation forms generated for the Talega Village development, each Talega Village unit registered in the PWC new home warranty program was issued the warranty booklet designated as HBLW 117 CA 01/03." A copy of that booklet was attached to the declaration.
The court denied Professional Warranty's motion to compel arbitration. The court reasoned, "Here, [Professional Warranty] has presented some evidence to show that [Builder Warranties] were issued to most (though not all) of the homeowners in the Association (HOA). But the evidence presented by [Professional Warranty] is insufficient to show that the [Builder Warranties] control here." The registration forms "do not reflect that [Builder warranties] were then issued to or delivered to any of them." As to the validation forms, "no admissible evidence is presented to demonstrate that those forms and the referenced warranty booklet were actually sent out to each homebuyer." Moreover, "[Professional Warranty] has not demonstrated that issuance to a subset of the homebuyers in the development is sufficient to bind HOA here." "Finally, [Professional Warranty's] validation forms appear to reflect that any [Builder Warranties] that were issued had expired by the time this case was filed in 2015." Professional Warranty appealed.
"The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination." (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) "`We will uphold the trial court's resolution of disputed facts if supported by substantial evidence. [Citation.] Where, however, there is no disputed extrinsic evidence considered by the trial court, we will review its arbitrability decision de novo.'" (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.)
"`[W]hen considering a motion to compel arbitration, the court must initially "determine whether the parties agreed to arbitrate the dispute in question." [Citation.] "This determination involves two considerations: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement."'" (Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1283 (Bruni).)
In our prior opinion, we concluded that the Builder Warranty did not become an enforceable agreement unless and until it issued. We relied most heavily on section 12.5 of the CC&R's, which applies to the Home Warranty. (Talega I, supra, G051950.) Section 12.6 contains an identical provision regarding the Association Property Warranty. Section 12.6 states: "THE ASSOCIATION PROPERTY WARRANTY, WHEN ISSUED, SHALL BE THE ONLY WARRANTY, EXPRESS OR IMPLIED, MADE BY DECLARANT WITH REGARD TO THE ASSOCIATION PROPERTY, AND DECLARANT DISCLAIMS ALL OTHER WEARRANTIES AS MORE FULLY SET FORTH IN THE DISCLAIMER ATTACHED AS EXHIBIT 1 TO THIS DECLARATION. This Section applies to a particular Dispute only to the extent an Association Property Warranty is actually issued and in effect at the time of that particular Dispute with respect to the particular Association Property at issue." (Italics added.)
Exhibit G to the CC&R's, entitled "Alternative Dispute Resolution Provisions," provides, "WITH RESPECT TO ALL DISPUTES, DECLARANT, OWNERS, AND THE ASSOCIATION SHALL COMPLY WITH THE DISPUTE RESOLUTION AND ARBITRATION PROCEDURES AND PROVISIONS SPECIFIED IN THE HOME WARRANTY OR THE ASSOCIATION PROPERTY WARRANTY, WHICHEVER IS APPLICABLE. . . . [Citation.] The Association acknowledges and agrees that the Home Warranty and the Association Property Warranty forms to be issued have been made available to the Association for review, that the Association has made such review of the Home Warranty and the Association Property Warranty and the dispute resolution procedures specified therein as the Association deems necessary and appropriate, and that the Association consents to participation in such procedures for resolution of Disputes."
Under Exhibit G, arbitration vis-à-vis the Builder Warranty is the primary method of resolving disputes. It is not, however, the only method. Exhibit G contains "SECONDARY ALTERNATIVE DISPUTE RESOLUTION PROCEDURES," which apply "TO THE EXTENT ANY OF THE DISPUTE RESOLUTION OR ARBITRATION PROCEDURES AND PROVISIONS SPECIFIED IN THE HOME WARRANTY OR THE ASSOCIATION PROPERTY WARRANTY, WHICHEVER IS APPLICABLE, ARE DETERMINED TO BE UNENFORCEABLE IN WHOLE OR IN MATERIAL PART PREVENTING THEIR USE, OR TO THE EXTENT A DISPUTE ARISES WITH AN OWNER WHO DID NOT RECEIVE A HOME WARRANTY. . . ." (Italics added.) The secondary procedure is simply arbitration by Judicial Arbitration and Mediation Services (JAMS), "or any other entity offering judicial reference dispute resolution procedures as may be mutually acceptable to the parties to the Dispute, pursuant to its standard arbitration procedures for construction matters." There is yet a third method of resolution, should the foregoing be deemed unenforceable, which is "a general judicial reference pursuant to California Code of Civil Procedure Sections 638(a) and 640-645.2. . . ." Professional Warranty, however, is not a party to the CC&R's, and it acknowledges that it may not avail itself of the secondary or tertiary ADR provisions. Nonetheless, we find some guidance in these provisions in that they acknowledge that the builder had the option of not issuing a warranty, and they ensure that there is a backup ADR provision in that case.
Professional Warranty essentially asks us to revisit our prior conclusion that issuance was a necessary precondition to the agreement to arbitrate, arguing the arbitration provisions are severable from the remainder of the Builder Warranty, and, therefore, even if the warranty never issued, the arbitration provisions apply. Professional Warranty contends Bruni, supra, 160 Cal.App.4th 1272 supports its conclusion.
In Bruni, plaintiff homeowners sued a builder for construction defects. (Bruni, supra, 160 Cal.App.4th at p. 1276.) The builder moved to compel arbitration pursuant to an express limited warranty. (Ibid.) The trial court ruled the arbitration agreement unconscionable, and the Court of Appeal affirmed, finding the "sweeping exclusions" in the warranty were unconscionable. (Id. at p. 1277.) This, of course, is not the aspect of the Bruni decision Professional Warranty relies upon.
Rather, it is the legal framework Bruni articulated. "Ordinarily, the court cannot consider any claim that the contract as a whole is invalid. Under Prima Paint v. Flood & Conklin Co. (1967) 388 U.S. 395 [citation] (Prima Paint), when the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA) applies, `arbitration clauses as a matter of federal law are "separable" from the contracts in which they are embedded. . . .' [Citation.] As a result, an arbitration clause may be enforceable regardless of whether the contract surrounding it is enforceable." (Bruni, supra, 160 Cal.App.4th 1283.) "Recently, in Buckeye Check Cashing, Inc. v. Cardegna (2006) 546 U.S. 440 [citation] (Buckeye) the Supreme Court held that Prima Paint applies to void as well as voidable contracts." (Bruni, at pp. 1283-1284.) Professional Warranty essentially stops here and asserts that the present situation is analogous.
The Bruni opinion did not stop there, however, and went on to distinguish between arguments about the validity of the contract, and arguments about the formation of the contract: "A court, however, still must consider one type of challenge to the overall contract: a claim that the party resisting arbitration never actually agreed to be bound." (Bruni, supra, 160 Cal.App.4th at 1284.) "[A] court must look to the precise nature of the claim that the party resisting arbitration is making. If it is claiming that it never agreed to the arbitration clause at all . . . then the court must consider that claim. On the other hand, if it is not denying that it agreed to the arbitration clause, but instead it is claiming some other defense to enforcement of the arbitration clause—e.g., illegality or fraud in the inducement—then the court must enforce the `arbitrability' portion of the arbitration clause by compelling the parties to submit that defense to arbitration. This approach is consistent with the Supreme Court's direction that `[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is "clea[r] and unmistakabl[e]" evidence that they did so.'" (Bruni, supra, 160 Cal.App.4th at p. 1287.)
In our view, the HOA's agreement to the Builder Warranty and the arbitration provisions it contained was conditional: If the warranty issued, the HOA agreed to be bound. This is consistent with section 12.6 of the CC&R's, which specifically addresses the ADR provisions in the Builder Warranty and imposes two conditions: the warranty had to not only issue, but also be "in effect." In other words, if the Builder Warranty never became effective, neither did the ADR provisions.
Thus, we reiterate our conclusion that the ADR provisions set forth in the Builder Warranty did not become binding unless and until it issued. The dispositive question is thus: Did the warranty issue to the HOA?
As was the case with the builder in the prior appeal, Professional Warranty never directly addresses this question. It presented evidence suggesting that most homeowners may have been issued a warranty, but there is nothing in the record to suggest the HOA was issued a warranty. And this was a requirement under exhibit I of the CC&R's, entitled, "
This requirement is consistent with the legal recognition of homeowners associations as independent legal entities. "It is . . . well established that a homeowners association is a separate legal entity apart from the owners, whether incorporated or not, with standing to sue or be sued even by a member." (Heiman v. Workers' Comp. Appeals Bd. (2007) 149 Cal.App.4th 724, 739.) Civil Code section 4805, part of the Davis-Sterling Common Interest Development Act, grants an association broad powers: "Unless the governing documents provide otherwise, and regardless of whether the association is incorporated or unincorporated, the association may exercise the powers granted to a nonprofit mutual benefit corporation, as enumerated in Section 7140 of the Corporations Code," with certain exceptions not relevant here. These powers include the power to "enter into contracts." (Corp. Code, § 7140, subd. (i).) Civil Code section 5980 grants an association the standing to litigate, in its own name, issues pertaining to the governing documents, the common area, and certain separate interests. Civil Code section 4035, subdivision (a), requires each association to designate a person to receive official communications to the association. There is no evidence in the record of who that person is for the HOA, much less that the Association Property Warranty was issued to the HOA vis-à-vis that person (or any other person).
In short, the association is not merely the aggregate of its members. It is an independent legal entity. Issuance of a home warranty to a subset of members did not equate to issuance to the HOA. And since there was no issuance to the HOA, the ADR provisions in the Builder Warranty never arose to an enforceable agreement as to the HOA.
Because we conclude the arbitration provisions in the Builder Warranty never became a binding agreement, we need not consider whether they are unconscionable. Moreover, we will not consider whether the individual homeowners are bound by the ADR provisions, as they are not parties to the lawsuit yet, and thus the issue is not ripe.
The order is affirmed. Respondent shall recover its costs incurred on appeal.
O'LEARY, P. J. and ARONSON, J., concurs.
