199 Cal. App. 4th 730
Cal. Ct. App.2011Background
- Burch sued Defendants for construction defect damages; Defendants moved to compel arbitration and appeal an order denying that motion.
- Trial court found the arbitration clause in addendum No. 2 ambiguous and allowed extrinsic evidence, including an oral hearing, to determine intent.
- Addendum No. 2 and the CAR arbitration clause contained conflicting terms about scope and application after escrow.
- HBW Warranty language and conference call evidence suggested arbitration would apply only to warranty-related disputes, not to California-law claims.
- Parties later struck a sentence in addendum No. 2, and the trial court found this modification showed no agreement to arbitrate non-warranty, non-escrow claims.
- The appellate court affirmed the denial of arbitration, holding no mutual assent to arbitrate non-warranty disputes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court could hear extrinsic oral testimony. | Burch; extrinsic evidence necessary to resolve ambiguity. | Defendants; arbritration clause integrated; extrinsic evidence not allowed. | Yes; trial court allowed extrinsic evidence. |
| Whether substantial evidence supports the court’s interpretation of the modification. | Burch; record supports her understanding of strikeout. | Defendants; conflicting evidence; interpretation should favor arbitration. | Yes; substantial evidence supports court’s interpretation. |
| Whether there was a valid agreement to arbitrate between Burch and Defendants. | Burch; strikeout preserved rights under California law. | Defendants; language made arbitration exclusive. | No; no mutual assent to arbitrate non-warranty claims. |
Key Cases Cited
- Rosenthal v. Great Western Fin. Securities Corp., 14 Cal.4th 394 (1996) (court determines arbitration enforceability; trial court may hear evidence of intent)
- Parsons v. Bristol Development Co., 62 Cal.2d 861 (1965) (substantial evidence standard for interpreting ambiguous contract terms aided by extrinsic evidence)
- Pacific Gas & Electric Co. v. G. W. Thomas Drayage etc. Co., 69 Cal.2d 33 (1968) (extrinsic evidence admissible to determine meaning when contract ambiguous)
- In re Marriage of Fonstein, 17 Cal.3d 738 (1976) (substantial evidence standard; defer to trial court’s contract interpretation)
- Heslin v. Lapham, 77 Cal.App.3d 137 (1926) (integration and interpretation principles; credibility considerations)
- Hotels Nevada v. LA. Pacific Center, Inc., 144 Cal.App.4th 754 (2006) (trial court weighs extrinsic evidence in arbitrability determinations)
- Banner Ent., Inc. v. Superior Court, 62 Cal.App.4th 348 (1998) (evidence of parties’ understanding admissible to ascertain binding agreement)