Forrester on Real Estate Law : San Diego Real Estate Lawyer & Attorney : Kevin Forrester Law Firm : California, Carlsbad, La Jolla, Escondido

Private arbitration decisions are not typically appealable in California, except in cases where:

1. The agreement to arbitrate specifically provides a right of appeal.

2. Our Courts of Appeal effectively provide a right of appeal. 

The recent decision of the California Second District Court of Appeal, entitled Burlage v. Superior Court (August 31, 2009) (PDF) 177 Cal.App.4th 166, may open the door a bit wider to appeals of private arbitration decisions.

The California rule on private arbitrations is described this way by the California Supreme Court in Cable Connection, Inc. v. DIRECTV, Inc.:

“'Because the decision to arbitrate grievances evinces the parties' intent to bypass the judicial system and thus avoid potential delays at the trial and appellate levels, arbitral finality is a core component of the parties' agreement to submit to arbitration. Thus, an arbitration decision is final and conclusive because the parties have agreed that it be so. By ensuring that an arbitrator's decision is final and binding, courts simply assure that the parties receive the benefit of their bargain.'” Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334 at 1355, quoting Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 at 10.

The Cable Connection court emphasized "that parties seeking to allow judicial review of the merits, and to avoid an additional dispute over the scope of review, would be well advised to provide for that review explicitly and unambiguously."  Cable Connection at 1361, emphasis added.

The agreement to arbitrate in Burlage did not provide a right of appeal. 

What happened in Burlage v. Superior Court:

The Burlage dispute involved an actual encroachment of a house's pool and fence on adjoining property owned by a country club, which encroachment was allegedly known by the seller, but not disclosed to the buyer at time of sale.  Before the arbitration, where the purchasers sought damages for the diminution in value of "their property and for the cost of moving the pool and fence that were on the encroaching land they now owned", the purchasers moved to exclude evidence of the fact that a title company had, subsequent to the sale, purchased a lot-line adjustment from the adjoining country club for the sum of $10,950, thereby curing the encroachment.

The arbitrator granted this motion to exclude evidence of the "fix" and, after 12 days of testimony, awarded the purchasers $552,750 in compensatory damages, $250,000 in punitive damages, and $732,570 in attorney's fees and costs.  The sellers moved to vacate this award under Code of Civil Procedure section 1286.2(a)(5) on the ground that the sellers were "substantially prejudiced" by the arbitrator's refused to hear "evidence material to the controversy."  Both the trial court and the Burlage court of appeal, with one justice dissenting, agreed.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In the buying and selling real estate, "unconditional" offers to purchase are a rarity. An offer to purchase is nearly always "conditional," in the sense that a buyer's obligation to buy depends upon - is conditioned upon - the occurrence of certain events, such as the buyer obtaining financing, receiving seller disclosures, performing inspections and the like. It would be a mistake, however, to believe that the right to inspect is the same thing as a "free look."

The California Residential Purchase Agreement and Joint Escrow Instructions (Form RPA-CA Revised 11/07) (the "California RPA") sets forth buyers' inspection and investigation rights as follows:

Paragraph 7 states that "[u]nless otherwise agreed . . . the Property is sold . . . subject to Buyer's investigation rights." (Paragraph 7A(i)(b))

And,

Paragraph 9 states that "Buyer's acceptance of the condition of, and any other matter affecting the Property, is a contingency of this Agreement as specified in this paragraph and paragraph 14B. Within the time specified in paragraph 14B(1), Buyer shall have the right at Buyer's expense unless otherwise agreed, to conduct inspections, investigations, tests, surveys and other studies ("Buyer Investigations"), including, but not limited to, the right to: (i) inspect for lead-based paint and other lead-based paint hazards; (ii) inspect for wood destroying pests and organisms; (iii) review the registered sex offender database; (iv) confirm the insurability of Buyer and the Property; and (v) satisfy Buyer as to any matter specified in the attached Buyer's Inspection Advisory (C.A.R. Form BIA)." (Paragraph 9A, emphasis added.)

And,

The Buyer's Inspection Advisory (made part of the California RPA through Paragraph 9, above) describes a vast array of components, conditions, restrictions, hazards, locations and other matters that the Buyer is advised to inspect or investigate and, effectively, approve before being obligated to buy the property.

And,

Paragraph 14 provides that the Buyer has 17 (or other "fill in the blank" number of) days to complete all Buyer Investigations (Paragraph 14B(1)), and either remove the applicable contingency, or cancel the agreement (Paragraph 14B(3)).

It might appear from the above contract language that a buyer has 17 (or other specified number of) days to "investigate" every conceivable aspect of the property that the buyer has conditionally agreed to buy, and, thereafter, to decide, in the buyer's absolute and unrestricted discretion, to either remove the "Buyer Investigation" contingency, or cancel the agreement. These imagined buyer rights to cancel are commonly, and mistakenly, referred to by agents as the buyer's "17-day free look."

Buyers, however, do not have unrestricted rights to "change their minds" under the California RPA.

• Email This
• Print
• Comments
• Trackbacks
• Share Link