Filed 2/4/22 Song v. Creative Global Investment CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions 

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

BRYAN J. SONG,

Plaintiff and Respondent,

v.

CREATIVE GLOBAL 

INVESTMENT, INC., et al.,

Defendants and Appellants.

 B299422

 B301697

 B304884

 (Los Angeles County

 Super. Ct. No. BC638221)

APPEAL from a judgment of the Superior Court of Los 

Angeles County. Barbara Ann Meiers, Judge. Affirmed.

Law Offices of J. P. Pak, J. P. Pak; Benedon & Serlin, 

Gerald M. Serlin and Kelly Riordan Horwitz for Defendants and 

Appellants.

Park & Lim, S. Young Lim and Jessie Y. Kim for Plaintiff 

and Respondent.

_______________________
2

A breach of contract dispute between co-investors in two 

Coffee Bean and Tea Leaf franchises proceeded to private 

arbitration, resulting in an award of $132,000 for plaintiff and 

respondent Bryan Song. Defendants and appellants Dong Yeoun 

Lee and Creative Global Investment, Inc., filed a petition to 

confirm the arbitration award, but included requests to have the 

award clarified and modified. Respondent filed an opposition to 

the modifications and asked the award to be confirmed.

At the motion to confirm hearing on April 6, 2018, the trial 

court expressed concerns that the arbitration award contained 

“serious clarification and/or completeness issues,” and 

subsequently on May 23, 2018, ordered the award vacated and 

set a date for a de novo bench trial. The trial court’s May 23, 

2018 minute order states “all parties being in agreement” with 

the order.

The case proceeded to trial to judgment without objection 

by any party, resulting in an award of $900,000 in damages and 

$3 million in punitive damages for Song. After the trial had 

concluded, appellants filed a motion for a new trial on May 31, 

2019, in which the attorney for appellants asserted for the first 

time that she merely “submitted” to the trial court’s insistence on 

vacating the arbitration award without consulting with her 

clients.

Appellants appealed from the trial judgment on the basis 

that the trial court had no authority to set aside the arbitration 

award and order trial de novo, among other substantive grounds

related to the trial judgment.

On the threshold question of whether the trial court had 

the authority to vacate the arbitration award and order a de novo 

judicial trial pursuant to the purported agreement of the parties, 
3

we conclude that it did have such authority by agreement, and 

that the record reflects that the agreement was authorized and/or 

ratified. Over more than a year, appellants actively participated 

in pretrial proceedings, including filing a pretrial motion 

affirming that they had stipulated to trial, and proceeded with 

trial to judgment before ever contending that appellants never 

consented to their attorney’s agreement to a trial de novo. By 

remaining silent and participating in the pretrial and trial 

proceedings without objection, the appellants’ agreement to 

vacate the award and proceed to a bench trial constituted a 

ratification of these proceedings and waiver of their right to 

arbitration.

On all other grounds related to the trial judgment, we 

affirm the judgment entered for the reasons stated below.

FACTUAL AND PROCEDURAL HISTORY

I. Factual Background

A. Song and Lee form two entities to jointly invest in

Coffee Bean franchises

Appellant Dong Yeoun Lee is the sole shareholder and CEO 

of appellant Creative Global Investment, Inc. (CGI), which owns 

Coffee Bean and Tea Leaf (Coffee Bean) franchises in Asia and 

California. Respondent Bryan Song is a businessman who owns 

and manages a liquor store and a karaoke cafe in Los Angeles. 

Lee and Song met each other in early 2015 through attending the 

same health club, began a friendly social relationship, and 

discussed investing in Coffee Bean franchises together.

Lee and Song ultimately agreed that CGI and Song would 

jointly form two new companies, CGI Gaju, LLC (Gaju) and CGI 

Paramount, LLC (Paramount),to open new Coffee Bean

franchises in Los Angeles (the Gaju location and the Paramount 
4

location). Lee told Song that they would be co-owners of each 

franchise through the LLCs. When asked about income and 

profits, Lee represented to Song that Song “would be able to take 

at least 2 percent of [his] investment every month.” Lee told 

Song that he was very happy to have met someone like Song and 

suggested that they become “brothers,” meaning that they “would 

share everything.”

In March 2015, Song and CGI entered into an investment 

agreement governing Gaju, written in Korean. Among other 

things, it required Song to invest $450,000, for which he would 

receive 49 percent of Gaju’s stock and 50 percent of its net 

income, and obligated CGI to pay any expenses in excess of 

$450,000 prior to the store’s opening. Song provided Lee with

separate payments of $200,000 and $250,000 for his required 

investment in Gaju, for which Lee gave him written receipts. 

The Gaju investment agreement also provided Song would pay 

CGI a $50,000 finder’s fee, which Song also paid; however, this 

$50,000 was ultimately applied toward Song’s investment in 

Paramount.

Based on their prior discussions, Song understood the Gaju 

investment agreement to mean that CGI and Song would form a 

new company, which would be the owner of the Gaju Coffee Bean 

franchise. Song completed a franchise application form with his 

personal information and provided it to Lee, who subsequently 

told him it had been approved. The Gaju location opened in 

December 2015.

In February 2016, CGI and Song entered into an operating 

agreement for Gaju drafted by Lee’s lawyer, written in English. 

The operating agreement specified that CGI was required to 

provide “Labor and $300,000” and Song was required to provide 
5

$450,000 as capital contributions for Gaju. Song and CGI were 

each entitled to 50 percent of net profits. Lee admitted that CGI 

never made its required $300,000 financial investment: He 

initially testified at deposition that CGI never put any money 

into Gaju, and at trial testified that he had invested $60,000.

In February 2016, CGI and Song also entered into an 

investment agreement and an operating agreement governing 

Paramount. The investment agreement provided that Song 

would invest $450,000 in Paramount and receive 39 percent of 

the stock while a third nonparty investor, The Korea Daily, would 

invest $100,000 and receive 10 percent of the stock; and a

nonparty named individual would receive 17.5 percent of the net 

income for working as the store manager. Lee told Song that the 

franchise agreement for the Paramount location would be held by 

the Paramount LLC.

The Paramount operating agreement was identical to the 

Gaju operating agreement except that CGI would hold 51 percent 

of Paramount’s shares, Song would hold 39 percent, and The 

Korea Daily would hold 10 percent; CGI would contribute 

$450,000 and labor, while Song and The Korea Daily would 

contribute $450,000 and $100,000, respectively, and CGI and 

Song would each receive a 45 percent interest while The Korea 

Daily would be allocated the remaining 10 percent interest. The 

Paramount location opened in July 2016. Song paid Lee 

$400,000 in cash for his investment in Paramount, for which he 

received no signed receipt. Lee also applied $50,000 Song had 

previously given him toward his investment in Paramount, and 

provided a receipt.

CGI entered into franchise agreements with Coffee Bean 

for the two stores on April 15, 2015, and June 1, 2016, 
6

respectively. Song, Gaju, and Paramount were not parties to the 

franchise agreements, thus only CGI had an actual ownership 

interest in the franchises. Song never received any return on his 

investments.

The personal and financial relationship between the two 

men was complicated in late 2015 by an apparent straw buyer 

scheme for Song to advance funds to Lee to purchase Song’s 

condominium, which was “ ‘upside down,’ ” in a “ ‘short sale,’ ” 

after which Song leased the condominium back from Lee. The 

relationship between Lee and Song further deteriorated by mid2016, when they had a physical altercation over repayment of 

other unrelated business funds advanced to Lee by Song, 

resulting in a restraining order against Song.

B. The arbitration clause and attorney fees provision

The Gaju and Paramount operating agreements each 

contain the same arbitration clause. In relevant part, the clause 

provides: “13.08. ARBITRATION. The parties further agree to 

submit any claim arising out of, relating to, or regarding the 

validity of, this Agreement in excess of the then current 

limitation for a small claims matter (presently $5,000.00), to 

binding arbitration administered by the American Arbitration 

Association (“AAA”) pursuant to the Commercial Rules of the 

AAA and California law in the County of San Bernardino, State 

of California, with all expenses being shared equally by the 

parties, subject to Section 13.03. This arbitration clause, 

however, will not deprive the parties of any right they may 

otherwise have to seek provisional injunctive relief from a court 

of competent jurisdiction. . . . The parties will ask the arbitrator 

to limit discovery to the greatest extent possible consistent with 

basic fairness. . . . The arbitrator will have no power to assess 
7

punitive or special damages, legal costs, attorneys’ fees, the fees 

of expert witnesses, unless the arbitrator finds a party to have 

acted in bad faith and except in accordance with Section 13.03. 

The arbitrator will not make any award that extends, modifies, or 

suspends any lawful term of this Agreement. The arbitrator 

must provide a written arbitration award setting forth the 

arbitrator’s findings of fact and conclusions of law. Judgment on 

any AAA award may be entered in any court having competent 

jurisdiction. Any costs incurred in the enforcement of the 

arbitration award will be paid by the party against whom 

enforcement is sought.”

Section 13.03 of the operating agreements provides that the 

prevailing party in “any dispute” resulting in arbitration or 

litigation is entitled to recover reasonable attorney fees, costs, 

and expenses.

II. Arbitration and Trial

A. Song sues CGI and Lee, and arbitration proceeds to a

final award of $132,000 for Song

On October 21, 2016, Song filed a complaint against CGI 

and Lee asserting claims against (1) CGI for breach of contract 

for failure to make its required capital contributions under Gaju’s 

operating agreement; (2) CGI for breach of contract for failure to 

make its required capital contributions under Gaju’s operating 

agreement and Paramount’s operating agreement; (3) CGI and 

Lee for intentional misrepresentation for allegedly inflating the 

amounts needed to construct the Coffee Bean stores so that Song 

would bear all the necessary costs; (4) CGI for breach of fiduciary 

duty for failure to make the capital contributions; and (5) CGI for 

enforcement of inspection rights to review books and records of 

Gaju. CGI and Lee successfully moved to compel arbitration.
8

On December 8, 2017, the arbitrator issued an award. 

Among other things, he found that CGI never made any financial 

contribution to Gaju, that CGI contributed at least $311,150 to 

Paramount, and that there was no documentary or other credible 

evidence that Song made any financial contribution to 

Paramount beyond the $50,000 the parties agreed was credited to 

him. The arbitrator concluded (1) CGI breached the Gaju 

operating agreement by not making its capital contribution; 

(2) CGI did not breach the Paramount operating agreement and 

substantially performed based on its capital contributions; 

(3) Song failed to prove CGI and Lee intentionally defrauded him; 

(4) CGI breached its fiduciary duty to Song by failing to make its 

required capital contribution to Gaju; and (5) the claim for right 

of inspection was moot. The arbitrator awarded damages for 

CGI’s breach of the Gaju contract in the amount of $132,000. The 

arbitrator described this figure as 50 percent of 2016 net income

if CGI had made its $300,000 capital contribution, payable under 

the operating agreement as a distribution of “funds not needed 

for operations.”

B. CGI and Lee ask the trial court to confirm the 

arbitration award with modifications

CGI and Lee filed a “Petition/Motion To Confirm 

Arbitration Award” with the trial court, asking “that the award 

be confirmed and made into an order, then judgment.” The 

motion included a proposed order to the trial court which 

“confirmed in all respects” the arbitration award and “entered 

[judgment] in conformity therewith.” But the petition was not a 

straightforward motion to confirm as it also included “further 

requests” that the trial court recalculate the extent of Song’s 

percentage interests in the two franchises in proportion to the 
9

capital contribution amounts the arbitrator found were actually 

made. These further requests were not part of the award.

Song filed a response requesting confirmation of the award

without modification, opposing the “further requests” as 

“contrary to law and public policy” given the presumption in favor 

of the validity of an arbitration award. Song stated, “As there is 

no evidence to support any claim of invalidity of the Award, and 

plaintiff has petitioned this Court to confirm the award, this 

Court should confirm the Award and disregard defendant’s 

‘further requests.’ [¶] . . . [¶] Plaintiff simply requests that the 

court confirm the arbitration award.”

CGI and Lee replied that “[c]ontrary to Plaintiff’s claim 

that petitioner is asking for an invalidity of the award, Petitioner 

simply asks that the award be confirmed and made into an order, 

then judgment.” The reply reiterated the request “that the Court 

confirm the Arbitration Award and order that Plaintiff’s LLC 

member percentage interests be adjusted according to the fully 

integrated Operating Agreements based on Plaintiff’s actual 

capital contribution amounts that were found to have been made, 

as referenced and concluded by the Arbitrator.”

C. The trial court expresses concern about the clarity 

and completeness of the arbitration award, vacates 

the award, and orders a de novo trial pursuant to the 

agreement of the parties

At the motion to confirm hearing on April 6, 2018, the trial 

court issued a minute order stating: “In light of what the court 

views as serious clarification and/or completeness issues with 

regard to the arbitration award, the parties are ordered to 

contact the arbitrator and to try and arrange for further 

proceedings to be conducted by him” or to obtain a statement 
10

from him as to why not. The trial court set “a further hearing on 

all matters” for May 23, 2018, unless the parties should give 

notice of further arbitration proceedings. No further arbitration 

proceedings occurred, and no additional statement, motions, or 

documents were filed with the trial court. No transcript of the 

April 6, 2018 hearing was included in the record on appeal.

At the May 23, 2018 hearing, the trial court issued a 

minute order stating: “All parties being in agreement the 

arbitration award is vacated and the case is set for a Court Trial 

on October 19, 2018.” The order further directed that “[n]o 

discovery beyond that done already is to take place but 

arbitration discovery documents products may be used.” There is 

no transcript of the May 23, 2018 hearing and the minute order is 

the only record of the proceedings that is included in the record 

on appeal.

D. Song amends his complaint before trial

Six weeks before trial was to begin, with new counsel, Song 

filed an ex parte application to amend his complaint to add a 

claim for declaratory relief. CGI and Lee filed an opposition.

The trial court ordered supplemental briefing on whether 

the causes of action properly belonged to Song or to the LLCs and 

whether declaratory relief or reformation were necessary to put 

the issues to rest. After receiving the supplemental briefing, the 

trial court granted Song’s motion to amend and directed Song to 

bring most of his claims as derivative claims on behalf of the 

LLCs and proceed on his own behalf on claims for intentional 

misrepresentation, breach of fiduciary duty, and enforcement of 

inspection rights.

Song filed a revised first amended complaint, asserting 

claims against: (1) CGI and Gaju for breach of written contract 
11

on Gaju’s behalf; (2) CGI and Paramount for breach of written 

contract on Paramount’s behalf; (3) CGI and Lee for intentional 

misrepresentation on Song’s behalf; (4) CGI for breach of 

fiduciary duty on behalf of Song, Gaju, and Paramount; (5) CGI 

for enforcement of inspection rights on Song’s behalf; (6) Lee, 

CGI, Gaju, and Paramount for rescission based on fraud on 

Song’s behalf; (7) Lee, CGI, Gaju, and Paramount for violation of 

securities laws entitling Song to rescission; (8) CGI, Gaju, and 

Paramount for declaratory relief on behalf of Gaju and 

Paramount; and (9) CGI, Gaju, and Paramount for reformation of 

contract on behalf of Gaju and Paramount.

On October 12, 2018, CGI and Lee filed an ex parte motion 

seeking to confirm the trial date, take judicial notice of the 

arbitration award as to the original third, fourth, and fifth causes 

of action (misrepresentation, breach of fiduciary duty, and rights 

of inspection), or, in the alternative, cancel the scheduled trial 

and/or confirm the arbitration award as to the original third, 

fourth, and fifth causes of action. The motion represented that 

“[o]n May 23, 2018, Plaintiff and Defendants agreed to stipulate 

to vacate the arbitration award in place of a retrial,” that 

“Defendants did agree with the Court in the April 6 motion 

hearing that the Arbitrator’s Award as applied to the First and 

Second Causes of Action was incomprehensible and 

unintelligible,” and that “Plaintiffs and Defendants had agreed to 

vacate the Arbitration Award and move forward with a one-time 

retrial by this Court only because of the incompleteness of and 

issues remaining in the Arbitrator’s Award specifically for the 

First and Second Causes of Action.”
12

At the hearing on the ex parte motion, the trial court 

continued the trial to January 2019 and ordered an accelerated 

briefing schedule on the first amended complaint.

E. The trial court awards Song $900,000 in 

compensatory damages and $3 million in punitive 

damages

The trial court conducted a bench trial in January 2019,

from which the issue of punitive damages was bifurcated. The 

trial court held that Song prevailed on all causes of action except 

for his claim for enforcement of inspection rights—which he had 

dismissed—and his request for declaratory relief, which it 

rejected on the basis that such relief is not proper where an 

action at law provides an adequate remedy. The trial court 

awarded Song $900,000 “as to all causes of action” upon which he 

prevailed.

Song sought $9 million in punitive damages. The trial 

court conducted the punitive damages phase in March 2019 and 

awarded Song $3 million in punitive damages. In conjunction 

with the punitive damages trial, Lee admitted that he had been 

charged with securities violations in South Korea and placed on 

probation for two years.

On April 19, 2019, the trial court issued its tentative 

judgment and proposed statement of decision. The court held Lee 

was liable for violations of fiduciary duties to Song, breaches of 

written contracts, intentional misrepresentation, and all other 

claims alleged other than enforcement of inspection rights and 

declaratory relief. The trial court found that “while Song was a 

very credible witness, defendant Lee has and had no credibility 

whatsoever.”
13

Overall, the trial court “found that Mr. Lee was an 

experienced and excellent ‘flimflammer’ who neatly defrauded 

plaintiff Song. Among other things, he also falsely promised 

monthly income to plaintiff Song which he knew was never going 

to be received by Song, and, in pursuit of his goals including but 

not limited to a goal of inspiring trust and confidence in his 

expertise and influence in the Coffee Bean franchise business, 

Lee pursued a phony social relationship with Song and held 

himself out to be a very wealthy man who was the holder of many 

franchises with a Coffee Bean company in other parts of the 

world, worthy of trust, and who, because of his relationship with 

that company would be able to obtain Coffee Bean franchises for 

himself and Song as equal ‘brothers’ to enjoy and share, using a 

newly created jointly held (Lee and Song, albeit it with Lee’s 

share held by GCI [sic]) LLC company for each Coffee Bean 

location/franchise, with these LLCs, ‘owned’ jointly by them, that 

would actually hold the franchise and be the franchisee, etc.”

The trial court specifically found that “[t]he LLC 

companies, purportedly, as represented to Song, to ultimately be 

the franchisees, were created and Song’s money was indeed put 

into them, albeit the monetary contributions to each required to 

be forthcoming from Lee were never contributed or invested. Mr. 

Song’s monies were then taken by Lee using his own company 

CGI which was the designated manager of each of these 

companies to pay all of the expenses required to open the 

franchises in issue, but not for the LLCs as franchisees. Instead, 

they were opened and the Song money used only for Lee’s benefit 

for he never caused the franchises to be ‘obtained’ by the LLCs. 

Instead the franchises ‘went to’ and were solely held and owned 

by Lee’s own company CGI in which Mr. Song and the LLCs held 
14

no interest. Mr. Song was led down a yellow brick road and 

received nothing in return for his money, much less all that he 

had been promised and induced to believe he would receive if he 

would but contribute the money sought by Lee. [¶] The bottom 

line is that plaintiff Song, as intended by Lee at the outset, put 

up everything and got nothing with Lee and his company, CGI, 

reaping all of the benefits.”

The trial court “determined that the two LLCs discussed in 

the evidence were also nothing more than additional vehicles set 

up to defraud Mr. Song by Mr. Lee,” and that “Lee simply created 

and used those LLCs as fraudulent ‘shells’ and conduits of Song’s 

money to fund the obtaining and opening of a Coffee Bean 

franchise for himself in the name of his CGI company with no 

ownership or other interest at all, directly or indirectly reposed in 

Song.”

Accordingly, the trial court concluded that “Song is entitled 

to a rescission of his dealings and contracts with Lee, the LLCs, 

and GCI [sic] based upon the Civil Code and California common 

law definitions of fraud and the liability that attaches thereto.” 

The court ordered that Song present a final judgment which 

includes “a provision that the contracts and membership 

interests noted above are all rescinded having been induced by 

fraud with the result that all monies deposited with the 

companies in issue and obtained by Lee are to be refunded” in the 

amount of $900,000 plus interest. In connection with the tort

claims, the trial court concluded Lee had acted “egregious[ly]”

and therefore imposed $3 million in punitive damages. Lee filed 

objections to the statement of decision, which the trial court did 

not address.
15

The trial court issued judgment against Lee on May 8, 

2019. CGI was not included in the judgment because proceedings 

against it were stayed when it filed for bankruptcy.

F. Lee moves for a new trial on grounds including that 

his attorney agreed to vacate the arbitration award 

without his consent

On May 31, 2019, Lee moved for a new trial on grounds

including that the trial court erred in refusing to confirm the 

arbitration award and the award of punitive damages was 

excessive. The motion asserted that at the May 23, 2018 hearing

where the parties purportedly agreed to vacate the arbitration 

award and proceed to trial “counsel were stunned and silently 

complied with the court’s order, but did not agree to the trial 

court’s action, or to waive their clients’. [Sic.] At no time were 

the clients present, nor consulted as to such a change.” The 

attorney for CGI and Lee declared in a supporting declaration 

that at the hearing she and Song’s prior counsel “were shocked 

and submitted to our Judge saying she was vacating the binding 

arbitration award, to which both he and I asked the court to 

confirm the award. There were no discussions with clients, Song 

or Lee, who were not in court on the hearing date. Frankly, 

neither [Song’s counsel] nor I had such authority.” No supporting 

declaration from Lee was attached. The motion asked that the 

arbitration award be confirmed.

On July 19, 2019, the trial court conducted a hearing on

Lee’s motion for a new trial and denied it on all grounds except 

that it agreed that Gaju and Paramount could not be included in 

the judgment as defendants. As for Lee’s other arguments, the 

trial court stated that “claims made in support thereof, both as to 

events that allegedly occurred in the course of the case in 
16

Department 12 and as to other matters, this court views as 

inaccurate.” The transcript of the proceedings reflects no 

discussion concerning Lee’s purported lack of consent to the 

motion to vacate and hold a trial de novo and nothing more than 

appellants’ counsel’s arguments and declaration were provided to 

the court.

Lee filed a timely notice of appeal from the original

judgment in July 2019. The trial court entered an amended 

judgment removing Gaju and Paramount in August 2019. Lee 

timely appealed from the amended judgment. After the 

bankruptcy court lifted the stay against CGI, the trial court 

entered yet another judgment against Lee and CGI. Lee and CGI 

timely appealed from this third judgment. This court 

consolidated the three appeals.

DISCUSSION

I. Standard of Review

Whether a party consented to or ratified an agreement of 

their attorney is a question of fact we review for substantial 

evidence (Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1223), as is 

whether a party waived the right to contractual arbitration 

(Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 

436, 443). “We infer all necessary findings supported by 

substantial evidence,” and “ ‘construe any reasonable inference in 

the manner most favorable to the judgment, resolving all 

ambiguities to support an affirmance.’ ” (Ibid.) The judgment of 

the trial court is presumed correct, and “[i]f the trial court’s 

resolution of the factual issue is supported by substantial 

evidence, it must be affirmed.” (Winograd v. American 

Broadcasting Co. (1998) 68 Cal.App.4th 624, 631–632.)
17

Where a party challenges the sufficiency of the evidence to 

support a judgment, we also apply the substantial evidence 

standard of review. (Zagami, Inc. v. James A. Crone, Inc. (2008) 

160 Cal.App.4th 1083, 1096.) We review claims of law, and the 

application of law to facts, de novo. (Yumori-Kaku v. City of 

Santa Clara (2020) 59 Cal.App.5th 385, 409–410.)

II. The Trial Court Acted with the Parties’ Agreement to 

Conduct a Trial De Novo

A. The record reflects that the parties stipulated to 

vacate the arbitration award and proceed with trial 

de novo

The parties in this case submitted their dispute to an 

arbitrator pursuant to a written agreement,thus this case 

involves private, or nonjudicial, arbitration. (Moncharsh v. Heily 

& Blase (1992) 3 Cal.4th 1, 8; see Blanton v. Womancare, Inc. 

(1985) 38 Cal.3d 396, 401–402 & fn. 5 (Blanton) [discussing the 

differences between judicial and nonjudicial arbitration].) Unlike 

judicial arbitration, which is nonbinding and offers the 

opportunity for a de novo trial after arbitration has been 

completed (Code Civ. Proc., § 1141.20, subd. (b)),1 private 

contractual arbitration like that at issue here “is by its essence 

binding” and “there is no right to de novo trial under the general 

arbitration statute” (§ 1280 et seq.). (Thomas J. Porreco v. Red 

Top Rv Ctr. (1989) 216 Cal.App.3d 113, 119; see Mesa Shopping 

Center-East, LLC v. O Hill (2014) 232 Cal.App.4th 890, 905 

[distinguishing judicial arbitration from “contractual arbitration, 

1 Undesignated statutory references are to the Code of Civil 

Procedure.
18

which is not subject to a de novo trial at the option of the 

plaintiff”].)2

However, as a matter of contract the parties can stipulate

to withdraw from arbitration at any time before an arbitration 

award is confirmed. (See Byerly v. Sale (1988) 204 Cal.App.3d 

1312, 1315 [judicial system’s involvement in private arbitration 

limited “[b]arring a subsequent stipulation not to arbitrate”]; 

Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 188 [courts may not 

act on dispute sent to arbitration “absent an agreement to 

withdraw the controversy from arbitration”].) “Contractual 

arbitrations are, as their moniker suggests, always a matter of 

agreement” (Rivera v. Shivers (2020) 54 Cal.App.5th 82, 90 

(Rivera)), an unconfirmed arbitration award “is no more than a 

contract between the parties to the arbitration” (Cinel v. 

Christopher (2012) 203 Cal.App.4th 759, 765), and the parties to 

an arbitration are thus free to mutually reject an arbitration 

award and agree that a judicial officer may conduct a trial 

de novo.

2 Song relies on section 1141.20 to argue that either party 

had the right to a de novo trial after the arbitration award, and 

that appellants’ “further requests” of the trial court in their 

petition to confirm the arbitration award should be construed as 

rejecting the award and electing trial de novo. However, 

“[s]ection 1141.20, which gives the parties the right to request a 

trial de novo within 30 days after an arbitration award, deals 

with judicial arbitration and is inapplicable to private 

arbitrations like this one.” (Trabuco Highlands Community Assn.

v. Head (2002) 96 Cal.App.4th 1183, 1191–1192.) By Legislative 

design, the provisions of the two statutory schemes are 

“ ‘mutually exclusive and independent of each other.’ ” (Blanton, 

supra, 38 Cal.3d at p. 402.)
19

Here, the record reflects an agreement by the parties that

the trial court determine the merits of the case by way of a trial 

de novo, effectively agreeing not to be bound by their contractual 

arbitration provision. “As a general matter, if a contract 

provision is subject to arbitration and a party seeks a judicial 

resolution of a disagreement which falls within the scope of the 

arbitration agreement, that party waives its right to arbitration.”

(Aviation Data, Inc. v. American Express Travel Related Services 

Co., Inc. (2007) 152 Cal.App.4th 1522, 1540.) “In the arbitration 

context, ‘[t]he term “waiver” has also been used as a shorthand 

statement for the conclusion that a contractual right to 

arbitration has been lost.’ ” (St. Agnes Medical Center v. 

PacifiCare of California (2003) 31 Cal.4th 1187, 1195, fn. 4.) The 

trial court’s May 23, 2018 minute order stated “all parties being 

in agreement” with the order, reflecting an oral stipulation to 

vacate the arbitration award and proceed with a bench trial.

There was no objection or contrary position stated by appellants 

for over a year. Indeed, on October 12, 2018, appellants filed an 

ex parte application to confirm the trial date of October 18, 2018,

or to set a new date as soon as possible, which affirmed the prior 

stipulation of the parties to de novo trial. In that motion, 

appellants’ counsel acknowledged that “Plaintiff and Defendants 

agreed to stipulate to vacate the arbitration award in place of a 

retrial,” and that “Plaintiffs and Defendants had agreed to vacate 

the Arbitration Award and move forward with a one-time retrial 

by this Court” based on appellants’ agreement at the April 2018 

hearing that the arbitration award was incomplete and 

unintelligible. At closing argument at trial, appellants’ counsel 

again reiterated that “the arbitrator wrote something 

incomprehensible.”
20

On its face, this record indicates the parties’ mutual 

agreement to a trial de novo through their attorneys’ stipulation,

giving the trial court the authority to vacate the arbitration 

award and proceed with a bench trial. “ ‘[A] stipulation of the 

attorneys will be presumed to have been authorized by the client’ 

unless the opposing side and the court are aware that the client 

has not consented to the stipulation.” (Rivera, supra, 54 

Cal.App.5th at p. 91.) Appellants’ suggestion that the trial court 

erroneously sua sponte vacated the arbitration award and 

conducted a trial de novo, in the absence of any agreement of the 

parties to do so, is contradicted by the minute order and 

appellants’ own motion papers. Even the new trial motion 

concedes that Lee’s attorney “submitted” without objection to the 

agreement to proceed with de novo trial. Accordingly, the trial 

court did not err in accepting counsel’s stipulation to the vacation 

of the arbitration award and de novo trial, as it was only after 

completing the entire trial and receiving an unfavorable 

judgment that Lee first sought to repudiate the attorney’s

stipulation.

B. Lee and CGI ratified counsel’s stipulation to 

vacation of the arbitration award and de novo trial

Appellants contend that Lee, who was not present at the 

May 23, 2018 hearing, did not authorize his attorney to enter into 

any such agreement. In appellants’ motion for new trial on 

May 31, 2019, the attorney for CGI and Lee first declared that at 

the hearing a year previously she and Song’s prior counsel “were 

shocked and submitted to our Judge saying she was vacating the 

binding arbitration award, to which both he and I asked the court 

to confirm the award. There were no discussions with clients, 

Song or Lee, who were not in court on the hearing date. Frankly, 
21

neither [Song’s counsel] nor I had such authority.” Appellants 

contend that the trial court’s order and resulting trial and

judgment are thus void because the purported agreement to 

vacate the arbitration award and hold a de novo judicial trial was 

not consented to or authorized by Lee. Song contends that even if 

the stipulation by appellants’ attorney was unauthorized, CGI 

and Lee ratified it through participating in the subsequent trial 

and not promptly challenging the trial court’s order.

The authority of an attorney to enter into stipulations on 

behalf of a client is certainly limited. An “ ‘attorney is authorized 

by virtue of his employment to bind the client in procedural 

matters arising during the course of the action’ ” but he may not 

“ ‘impair the client’s substantial rights or the cause of action 

itself.’ ” (Blanton, supra, 38 Cal.3d at pp. 403, 404 [arbitration 

award void where plaintiff’s attorney, without his client’s 

consent, stipulated to submit medical malpractice case to binding 

arbitration]; e.g., Sanker v. Brown (1985) 167 Cal.App.3d 1144, 

1145–1146 (Sanker) [defendant entitled to vacate judicial 

arbitration award because he never agreed to his attorney 

waiving right to trial de novo, even though he agreed to 

nonbinding arbitration].) Moreover, arbitration is a matter of 

contractual right, and “ ‘[a]bsent express authority, it is 

established that an attorney does not have implied plenary 

authority to enter into contracts on behalf of his client.’ ”

(Blanton, supra, 38 Cal.3d at p. 407; Toal v. Tardif, supra, 178 

Cal.App.4th at p. 1221 [“a party’s consent is essential to ‘the 

contractual underpinning of the arbitration procedure’ ”].)

However, even a client who does not initially provide 

express consent may be bound by an attorney’s unauthorized 

stipulation if the client ratifies the action. (Blanton, supra, 38 
22

Cal.3d at pp. 403, 408; Rivera, supra, 54 Cal.App.5th at p. 92 

[“even an unauthorized act by an attorney concerning substantial 

rights can be later ratified by the client and thus bind him or 

her”].) In Rivera, for example, an attorney’s stipulation to

binding arbitration was ratified by the client where “the record 

shows no evidence either side ever objected to the stipulation or 

to the arbitration itself” or argued that the stipulation lacked 

consent. (Rivera, supra, 54 Cal.App.5th at p. 92.) The court 

concluded that “the parties’ conduct was always consonant with a 

binding arbitration, and thus the failure to obtain the clients’

signatures on the stipulation was harmless.” (Id. at p. 93.)

Similarly, in Caro v. Smith (1997) 59 Cal.App.4th 725 (Caro), an 

attorney’s stipulation to binding arbitration was ratified where 

the client affirmatively acquiesced to arbitration without 

objection and her attorney “never filed a declaration from [the 

client] purporting to repudiate her oral agreement to arbitrate.” 

(Id. at p. 730.)

Here, the trial court’s May 23, 2018 order vacating the 

arbitration award by agreement of the parties stood without 

contradiction for more than a year, while Lee actively 

participated in pretrial proceedings and trial itself. His conduct

for over a year was always consonant with agreement for a 

de novo trial. In Blanton, supra, 38 Cal.3d 396, and Sanker,

supra, 167 Cal.App.3d 1144, in contrast, the clients promptly 

repudiated their attorney’s stipulations to binding arbitration 

upon learning the nature of the stipulations. Moreover, even in 

the new trial motion where he finally asserted that his attorney’s 

stipulation was unauthorized, Lee failed to provide his own 

declaration as to lack of consent. Nothing more was presented to 

the trial court than the claim in the new trial motion that at the 
23

time of the May 23, 2018 hearing Lee’s attorney “submitted” to 

the stipulation to de novo trial without prior discussion with her 

client. At the hearing on the new trial motion, Lee’s lack of 

consent was not discussed or asserted. As the Caro court noted, 

“[c]lient ‘no knowledge’ declarations were filed in both Blanton

. . . and Sanker,” and in the face of purported lack of client 

consent a client’s “silence says it all.” (Caro, supra, 59 

Cal.App.4th at p. 733 & fn. 3.)

The trial court acted reasonably in relying on counsel’s

stipulation without protest, and in rejecting Lee’s tardily asserted 

argument that he did not agree to trial. “It is a fundamental rule 

of appellate procedure that an order will not be disturbed on an 

appeal prosecuted by a consenting party.” (In re Marriage of 

Carter (1971) 19 Cal.App.3d 479, 488.) On any discernable 

ground, there was consent by agreement. It was only when 

things went against appellants that the consent issue surfaced.

The record reflects a stipulation by consent within the meaning of 

this rule.

III. Substantial Evidence Supports the Award of $900,000

Appellants note that the statement of decision refers to 

both compensatory damages and rescission when discussing the 

$900,000 award and contend that this is reversible error because 

Song should have either elected rescission for fraud or damages 

for breach of contract. “Rescission and damages are alternative 

remedies,” and “ ‘[t]he election of one [remedy] bars recovery 

under the other.’ ” (Wong v. Stoler (2015) 237 Cal.App.4th 1375, 

1385.) “The party may disaffirm the contract, treating it as 

rescinded, and recover damages resulting from the rescission.

[Citation.] Alternatively, the party may affirm the contract, 
24

treating it as repudiated, and recover damages for breach of 

contract or fraud.” (Id. at p. 1384.)

We conclude that notwithstanding some minor facial 

ambiguity in the statement of decision and the court’s conclusion

that the facts supported breach of contract liability, the record is 

clear that Song elected rescission based on fraud as his chosen 

remedy. During closing argument, Song’s counsel notified the 

trial court of his client’s election to disaffirm the contract and 

represented that Song “seek[s] recision [sic] and restitution” in 

the sum of $900,000. The statement of decision makes one initial 

general reference to “the compensatory damages now also 

awarded against defendant Lee in the sum of $900,000,” but the 

court then specifically found that “Song is entitled to a rescission 

of his dealings and contracts with Lee, the LLCs, and GCI [sic] 

based upon the Civil Code and California common law definitions 

of fraud and the liability that attaches thereto,” and ordered that 

Song present a final judgment which includes “a provision that 

the contracts and membership interests noted above are all 

rescinded having been induced by fraud with the result that all 

monies deposited with the companies in issue and obtained by 

Lee are to be refunded.”

Rescission damages are “damages that would restore the 

plaintiff to the position that she would have been in if had she 

not entered the contract.” (Akin v. Certain Underwriters at 

Lloyd’s London (2006) 140 Cal.App.4th 291, 296.) The amount of 

$900,000 plus interest is thus supported as the return of the total 

amount Song invested in Gaju and Paramount. Song testified 

that he paid Lee $450,000 as his investment in Gaju ($50,000 of 

which was later applied to Paramount), and introduced receipts 

for these payments. Song also testified that he paid Lee $400,000 
25

in cash toward his investment in Paramount. The trial court 

found Song was a very credible witness, and his testimony 

constitutes substantial evidence in support of the award.

IV. The Punitive Damage Award Was Proper

Having concluded that the trial court’s $900,000 award was 

not improper, we next address the award of punitive damages. 

Appellants contend that the evidence was insufficient to support 

a punitive damages award and that the award was excessive as a 

matter of law. We conclude that punitive damages were proper 

and affirm the trial court’s award and determination of the 

amount of punitive damages.

A. Substantial evidence supports the trial court’s 

finding that Lee engaged in conduct warranting 

punitive damages

We review the evidence supporting punitive damages under 

the substantial evidence standard. (Stewart v. Union Carbide 

Corp. (2010) 190 Cal.App.4th 23, 34.) Punitive damages are 

permissible on a showing of conduct amounting to “oppression, 

fraud, or malice.” (Civ. Code, § 3294, subd. (a).) Our substantial 

evidence review proceeds in light of the clear and convincing 

standard of proof applicable at trial, considering whether the 

record as a whole contains substantial evidence from which a 

reasonable trier of fact could have found clear and convincing 

evidence of “ ‘oppression, fraud, or malice’ that allows for the 

imposition of punitive damages.” (Conservatorship of O.B. (2020) 

9 Cal.5th 989, 999; Civ. Code, § 3294, subd. (a).)

There was sufficient evidence in the record that Lee

engaged in fraudulent and/or malicious conduct resulting in 
26

Song’s harm.3 Lee told Song that they would be co-owners of 

each franchise through the LLCs. When asked about income and 

profits, Lee represented to Song that Song “would be able to take 

at least 2 percent of [his] investment every month.” Lee obtained 

Song’s confidence, told Song that he was very happy to have met 

someone like Song, and suggested that they become “brothers,” 

meaning that they “would share everything.”

To the extent Lee testified to the contrary, the parties agree 

in their joint settled statement of the punitive damages phase 

that the trial court rejected Lee’s credibility.

Because of Lee’s misrepresentations, Song was initially 

unaware he was not actually a co-owner of either Coffee Bean 

franchise, that CGI had not made its full required investments, 

and that the Gaju and Paramount LLCs were purely passthrough entities to shuttle funds to franchises owned solely by 

CGI. Song, Gaju, and Paramount were not parties to the 

franchise agreements, thus only CGI had an actual ownership 

interest in the franchises. Song never received any ownership 

stake or any income on his investments. Lee’s

misrepresentations and false promises directly led to Song’s harm 

and constitute sufficient evidence of conduct amounting to 

oppression, fraud, or malice to support punitive damages.

3 Our conclusion that there was substantial evidence from 

which a reasonable trier of fact could have found clear and 

convincing evidence of “ ‘oppression, fraud, or malice’ ” is 

unaffected by the trial court’s incidental use of the phrase 

“preponderance of the evidence” at the punitive damages phase of 

trial.
27

B. The punitive damages award was not excessive

“The purpose of punitive damages is to punish wrongdoers 

and thereby deter the commission of wrongful acts.” (Neal v. 

Farmers Ins. Exchange (1978) 21 Cal.3d 910, 928, fn. 13; Zaxis 

Wireless Communications v. Motor Sound Corp. (2001) 89 

Cal.App.4th 577, 581.) “The function of punitive damages is not 

served if the defendant is wealthy enough to pay the award 

without feeling economic pain.” (Zaxis, at p. 581.) However, the 

amount of the award must not exceed the level necessary to 

punish and deter. (Adams v. Murakami (1991) 54 Cal.3d 105, 

110.) “In determining whether a punitive damages award is 

excessive, the Supreme Court has set forth three factors to guide 

us: (1) the reprehensibility of the defendant’s conduct; (2) the 

actual harm suffered; and (3) the wealth of the defendant.”

(Zaxis, at pp. 581–582, citing Neal v. Farmers Ins. Exchange, at 

p. 928.) An award may be reasonable in light of the first two 

factors but so disproportionate to the defendant’s ability to pay 

that the award is excessive for that reason alone. (Adams v. 

Murakami, at p. 111.)

Although appellants primarily address the third factor, the 

relationship of the amount of punitive damages to Lee’s wealth, 

here, the actual harm to Song was the loss of $900,000 with no 

actual ownership interest in either franchise as he had been led 

to believe. Although the harm was not physical or in disregard of 

health or safety, Lee accomplished the relevant harm by 

obtaining the confidence of and financially targeting his 

purported friend Song, who considered him like a “brother.” 

There is evidence that he convinced Song to invest $900,000 in 

the LLCs for Lee and CGI’s sole benefit through intentional 

deceit, including representing to Song that Song would be a co-
28

owner of the franchises, that Lee via CGI would also invest 

substantial sums of money in the LLCs, and that Song would 

receive monthly income from his investment. Although Lee

promised under the operating agreements to pay, he did not, and 

he obscured the true nature of the LLCs as mere pass-through 

investment entities. The making of intentionally false

representations and promises indicates intentional deceit rather 

than “ ‘mere accident.’ ” (Simon v. San Paolo U.S. Holding Co., 

Inc. (2005) 35 Cal.4th 1159, 1181.) Lee’s affirmative 

misrepresentations and false promises show he was not merely 

indifferent to, but actively sought to injure Song’s rights.

Overall, Lee’s conduct displayed moderate reprehensibility with 

the award reasonable in light of the harm and level of 

reprehensibility.

The $3 million punitive damages award is not excessive in 

light of the evidence provided of Lee’s ability to pay. Lee testified 

at deposition that he had dozens of Coffee Bean stores in 

Cambodia, Thailand, China, and Southern California, residence 

equity of more than $3 million in a luxury home he had lived in 

for over 30 years, and conceded that he was required to show a 

net worth of at least $5 million to be a Coffee Bean franchisee. 

The trial court also noted that he held himself out to be “a multimillion-dollar person,” and that just days before Lee had 

represented in an e-mail to a real estate broker that he had 

money to invest in a new commercial property for another Los 

Angeles Coffee Bean franchise. “There is no formula based on net 

worth for determining what amount is too much. The 

fundamental underlying principle is that punitive damages must 

not be so large they destroy the defendant.” (Rufo v. Simpson

(2001) 86 Cal.App.4th 573, 625.) Given the evidence of Lee’s 
29

wealth there is no indication that this award will destroy Lee 

economically.

Lee testified that his net worth was minimal and presented 

bank records showing he had little money in his accounts. He 

also stated that his interest in the Asian Coffee Bean stores was 

only 1 percent each and that he had lied at deposition when he 

said he owned them. However, as already noted,the trial court 

found Lee not credible. Accordingly, we will not disturb the 

court’s determination.

Finding no error, we affirm the trial court’s award of 

punitive damages.

V. The Fee Award Was Proper

The trial court awarded Song $86,583 in attorney fees. “In 

any action on a contract, where the contract specifically provides 

that attorney’s fees and costs, which are incurred to enforce that 

contract, shall be awarded either to one of the parties or to the 

prevailing party, then the party who is determined to be the 

party prevailing on the contract, whether he or she is the party 

specified in the contract or not, shall be entitled to reasonable 

attorney’s fees in addition to other costs.” (Civ. Code, § 1717, 

subd. (a).)

Appellants argue that the fee award is improper to the 

extent it was based on the attorney fees provision in section 13.03 

of the operating agreements because Lee’s alleged fraud, if it 

occurred, rendered the agreements invalid and incapable of being 

breached despite the trial court’s finding that Song prevailed on 

all breach claims. We reject this argument and conclude that 

Song’s action was an action “on the contract” for purposes of Civil 

Code section 1717. In any event, to the extent appellants’ 

argument rests on the proposition that the trial court 
30

substantively invalidated the agreements in tort, the fees 

provision provides that fees are available in “any dispute” 

between the parties that resulted in arbitration or litigation,thus 

the fee award would be supported either way. “[A] broadly 

phrased contractual attorney fee provision may support an award 

to the prevailing party in a tort action,” and “ ‘ “ ‘[p]arties may 

validly agree that the prevailing party will be awarded attorney 

fees incurred in any litigation between themselves, whether such 

litigation sounds in tort or in contract.’ ” ’ ” (Gil v. Mansano

(2004) 121 Cal.App.4th 739, 743; see also Hastings v. Matlock

(1985) 171 Cal.App.3d 826, 841 [“In an action to enforce the 

rescission of a written land sale agreement, containing a clause 

for attorney’s fees which does not limit recovery of such fees to 

any particular form of action involving the contract, the 

prevailing party is entitled to an award of such fees”].)
31

DISPOSITION

The judgment is affirmed. Costs are awarded to Song.

NOT TO BE PUBLISHED.

LUI, P. J.

We concur:

ASHMANN-GERST, J.

CHAVEZ, J.