Court Opinion

ID: 8214300
Source: CourtListenerOpinion
Date Created: 2022-10-14 17:02:54.285646+00
Date Added: 2024-06-11T16:42:29.259396
License: Public Domain

Filed 10/14/22 Johnson v. Milestone Financial CA3
                                           NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                     (Sacramento)
                                                            ----

 DANIEL JOHNSON, JR., as Conservator, etc.,

                    Plaintiff and Appellant,                                                   C094370

           v.                                                                       (Super. Ct. No. 34-2018-
                                                                                    00243733-CU-FR-GDS)
 MILESTONE FINANCIAL, LLC,

                    Defendant and Respondent.

         Daniel Johnson, Jr., conservator for Arletha Mae Johnson, appeals the
confirmation of an arbitration award in favor of Milestone Financial, LLC (Milestone)
after Daniel1 sued Milestone for various causes of action relating to Milestone’s lending
of money, secured by real property, to Arletha. Daniel contends the arbitration award
must be vacated because (1) it contravenes public policy protecting elders and (2) it
contravenes legislative policy concerning attorney’s fees awards. Milestone, for its part,
contends (3) we should award costs and attorney’s fees for this appeal against Daniel as
conservator and in his personal capacity. Finding no error, we will affirm the trial court’s
order confirming the arbitration award and award costs and attorney’s fees on appeal to
Milestone, but not against Daniel in his personal capacity.

1 We refer to Johnson family members by their first names for clarity.

                                                             1
                                     BACKGROUND
       Arletha, who was 94 years old at the time of the arbitration in this case, has four
children: Janice, Charletta, Kevin, and Daniel. Arletha owned several rental properties
in Sacramento and Vallejo. At the time of her husband’s death in 2013, none of the
properties were encumbered with debt.
       Arletha’s son Kevin became involved in two cannabis-related companies and
needed funds for the businesses. Kevin approached Arletha about obtaining loans on her
properties to provide him funding for the businesses, and she agreed , while being clear he
would be required to pay off the loans.
       The loans relevant to this action were obtained from Milestone in 2016 and 2017.
The loans were hard money loans. As explained in the arbitration panel’s final award,
“[t]he hard money lending industry serves a relatively small cohort of borrowers, those
whose credit or income either cannot qualify for conventional loans, or those whose
exigent need for loan funds makes the longer wait-time to complete conventional loan
processes unworkable. Hard money lenders like Milestone work only with borrowers
who are represented by brokers. Hard money lenders make loans for commercial
purposes and Arletha confirmed in her applications that this was the general purpose for
the loans. For this reason, too, these types of loans are secured only by commercial
properties and not private residences. The experts in this arbitration are in agreement that
hard money lenders look only to the value of the property securing the loan and not to the
creditworthiness of the borrower. It is the likelihood of recovering the value of the loan
and fees through foreclosure and not the repayment of the periodic payments that drives
the lending process. This is why the loan-to-value ratios for hard money loans are
significantly lower than those in conventional lending. In fact, Johnson’s expert witness
agreed that Milestone did not violate any California law, rule or regulation relating to
hard money lending in its underwriting of these loans to Arletha. [¶] These facts being
undisputed, arguably it would ‘exceed the scope of its conventional role as a mere lender

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of money’ for a hard money lender to engage in the activities argued by Johnson,
including investigating the purpose for the loan, the creditworthiness of the borrower, the
mental capacity of the borrower or the personal circumstances driving the application for
these niche financial transactions.”
       In 2016, Arletha, working through a loan broker, with Kevin making most of the
arrangements, obtained a loan from Milestone for $820,000, secured by properties in
Vallejo. After nine months, however, Arletha had not made any payments on the loan,
and Milestone sent her a notice of default. In 2017, the loan broker and Kevin contacted
Milestone to arrange a refinance of the loan, and Milestone agreed to loan Arletha $1.23
million to pay off the 2016 loan and provide additional funds to Arletha.
       In 2018, the 2017 loan from Milestone went into default, and Milestone initiated
foreclosure proceedings. However, Kevin and Milestone negotiated a settlement
requiring Kevin to pay Milestone $60,000, part of which would go toward principal on
the 2017 loan. Arletha signed the settlement with a notary present. Within a few months,
however, Arletha had not made any further payments on the loan, and Milestone
foreclosed on the Vallejo properties.
       Daniel initiated an action against Kevin and Milestone asserting claims for
declaratory relief, cancelation of a written instrument, quiet title, breach of fiduciary duty,
fraud, negligence, financial elder abuse, lack of capacity, and violation of Business and
Professions Code section 17200. Milestone filed a petition to compel arbitration, Daniel
did not oppose the petition, and the matter was arbitrated before Honorable Ignazio
Ruvolo (ret.), Honorable Joseph Biafore (ret.), and Honorable Richard Silver (ret.).
       The arbitration panel unanimously ruled in favor of Milestone on all causes of
action except for negligence and recission, as to which Judge Silver disagreed with the
majority. Judge Silver said Milestone had a legal duty to Arletha and breached that duty.
Judge Silver also was of the opinion that Arletha had mild dementia when she signed the
settlement agreement and, therefore, it was not enforceable against her.

                                              3
       The majority wrote extensively about Arletha’s mental capacity to enter into the
agreements. It found specifically that Daniel failed to establish she did not have the
capacity to enter into the agreements, including the 2018 settlement, even though she
later became subject to a conservatorship. The majority said Daniel failed to prove that
the 2017 loan and settlement were subject to rescission due to lack of capacity, unsound
mind or undue influence.
       In addition to its decision on the merits, the arbitration panel awarded Milestone
$1.2 million in costs and attorney’s fees.
       After the arbitration panel issued its final award, Milestone filed a petition in the
trial court to confirm the award, and Daniel opposed the petition. The trial court
confirmed the award, specifically stating that Daniel had shown no public or legislative
policy or unwaivable statutory right that would permit the trial court to vacate the award.
The trial court also awarded $10,753 in costs and attorney’s fees to Milestone for the trial
court proceedings because the relevant agreements allowed the prevailing party to
recover costs and attorney’s fees.
                                STANDARD OF REVIEW
       Our review of the arbitration award is de novo. (Douglass v. Serenivision, Inc.
(2018) 20 Cal.App.5th 376, 386.)
       In crafting his statement of facts for his opening brief on appeal, Daniel relied
principally on Judge Silver’s concurring and dissenting opinion in the final arbitration
award. However, Judge Silver, acting alone, could not adjudicate the facts of this case in
arbitration because his concurring and dissenting opinion did not have the force of a final
award, even if he could give his opinion of what the material facts were. Only the
majority could adjudicate the facts. “It is the duty of an appellant to provide an adequate
record to the court establishing error. Failure to provide an adequate record on an issue
requires that the issue be resolved against appellant. [Citation.]” (Barak v. The
Quisenberry Law Firm (2006) 135 Cal.App.4th 654, 660.) Therefore, we cannot rely

                                              4
on statements of a dissenting arbitration panel member to establish the facts of this case.
Instead, to the extent we need to consider the facts, we draw them from the final award’s
majority opinion. As the majority opinion noted, “Any discrepancy between the
statement of facts in this Final Award and the presentation of facts by either party is the
result of the Panel’s determination of factual disputes, credibility of witnesses, relevancy
of evidence, burden of proof and weight of the evidence presented.”
       On appeal, Daniel cited an unpublished appellate decision in an effort to support
his arguments, in contravention of rule 8.1115 of the California Rules of Court.
Although Milestone suggests this warrants sanctions, we do not consider the suggestion
because Milestone did not file a motion for sanctions. (See Cowan v. Krayzman (2011)
196 Cal.App.4th 907, 919 [party must file proper motion for sanctions under Cal. Rules
of Court, rule 8.276(b)(1)].)
                                      DISCUSSION
                                              I
       Daniel contends the arbitration award contravenes public policy protecting elders
and must therefore be vacated.
       Under Code of Civil Procedure section 1285,2 a party to an arbitration award may
petition the trial court for an order confirming, correcting, or vacating the award.
California law favors resolving disputes in arbitration. (Moncharsh v. Heily & Blase
(1992) 3 Cal.4th 1, 9 (Moncharsh).) Generally, arbitration awards are immune from
review, and the grounds for challenging arbitration awards are limited. Errors of fact and
law are not reviewable, with few exceptions. (Id. at p. 11.)
       Statutory grounds for vacating the award protect the parties from procedural
unfairness, such as corruption or fraud in the arbitration process. (§ 1286.2.) Daniel

2 Undesignated statutory references are to the Code of Civil Procedure.

                                              5
contends the arbitration panel exceeded its powers by issuing an award that violates a
well-defined public policy.
       “An arbitrator exceeds his or her powers if the arbitration award violates a
statutory right or otherwise violates a well-defined public policy. (Jordan v. Department
of Motor Vehicles (2002) 100 Cal.App.4th 431, 443.)” (Department of Personnel
Administration v. California Correctional Peace Officers Assn. (2007) 152 Cal.App.4th
1193, 1195.) This court explained one arbitration award violated public policy “when the
arbitrator determined that a written collective bargaining memorandum of understanding
(MOU) between [California Correctional Peace Officers Association] and the
Department of Personnel Administration (DPA) did not comport with the parties’ actual
agreement. [¶] The arbitrator reformed the MOU after it had been ratified and approved
by the Legislature pursuant to the Ralph C. Dills Act (Dills Act). [Citation.] In changing
the terms of the MOU after it was approved by the Legislature, the arbitrator exceeded
her powers by violating the Dills Act and the important public policy of legislative
oversight of state employee contracts.” (Ibid.) No similar violation of a well-defined
public policy is present in this case.
       Daniel argues the state’s elder abuse laws establish a well-defined public policy
violated by the arbitration panel. In his words, “the arbitration agreement was void to the
extent it sought to change the standards and duties of a lender with respect to elder abuse,
fraud, and undue influence, and shift the attorneys’ fees and costs to defendant in a case
that sounded in elder abuse.”
       The arbitration panel found that Daniel failed to prove Milestone engaged in elder
abuse. Daniel now claims the arbitration award contravenes the public policy reflected in
elder abuse law, but addressing the argument would allow Daniel to essentially relitigate
the matter in court after losing in arbitration. As the trial court observed, “Even if the
Final Award here is based on an erroneous conclusion on contested issues of fact or law,
this Court is not permitted to review either the rationale or the sufficiency of the

                                              6
evidence.” Errors of fact or law are not reviewable. (Moncharsh, supra, 3 Cal.4th at
p. 11.) Because Daniel failed to prove there was any elder abuse, his contention in this
court that the arbitration award must be vacated because it violates the public policy
against elder abuse cannot succeed.
       Daniel also argues the arbitration award contravenes public policy because the
arbitration panel should have imposed a duty on Milestone to investigate any suspicious
and potentially fraudulent activities against Arletha and, based on Milestone’s alleged
failure to properly investigate, should have found Milestone negligent. As with the
allegations of elder abuse, Daniel failed to establish in arbitration that Milestone violated
any duty to Arletha.
       Without a foundation of some legal wrongdoing, Daniel’s arguments about the
arbitration award contravening public policy are unsupported.
                                              II
       Daniel also contends the arbitration award of costs and attorney’s fees contravenes
legislative policy because a defendant in an elder abuse or unfair competition case cannot
assert a right to attorney’s fees.
       The arbitration was originally classified as consumer arbitration. However, the
arbitration panel reclassified it as commercial arbitration because the loans Milestone
made to Arletha were commercial hard money loans. Having done so, the arbitration
panel had authority to award costs and attorney’s fees. As noted, it awarded $1.2 million
in costs and attorney’s fees.
       In making its award, the arbitration panel noted that it had authority to award
attorney’s fees under the parties’ agreements. But it also noted a defendant may not
recover attorney’s fees incurred in defending against an elder abuse claim, even if the
defendant is the prevailing party. (Welf. & Inst. Code, § 15657.5, subd. (a); Wood v.
Santa Monica Escrow Company (2007) 151 Cal.App.4th 1186.) The prohibition applies
to work attributable to any elder abuse claim or any other claim with inextricable overlap.

                                              7
(Wood, at pp. 1190-1191.) The arbitration panel considered this prohibition and applied
it to work attributable to the elder abuse claim, as well as the fraud claims because they
overlapped with the elder abuse claim. The arbitration panel therefore reduced its
attorney’s fees award for the time attributable to the elder abuse and fraud claims. It
determined, however, that the other claims did not overlap with the elder abuse claims.
       Similarly, the arbitration panel recognized it could not award attorney’s fees for
work attributable to Daniel’s unfair competition claim against Milestone under Business
and Professions Code section 17200, which Milestone defeated at an early stage of the
arbitration in a dispositive motion. (See Walker v. Countrywide Home Loans, Inc. (2002)
98 Cal.App.4th 1158 [attorney’s fees unavailable in unfair competition law case].)
However, the arbitration panel found the time of Milestone’s counsel dedicated to that
claim was negligible, so the arbitration panel did not reduce the fees for any time spent
on the claim.
       Daniel argues the arbitration award contravenes legislative policy because all of
the claims were fundamentally intertwined with the elder abuse and unfair competition
claims. But this argument is also just an attempt to relitigate an issue lost in arbitration.
The arbitration panel considered the laws regarding attorney’s fees for elder abuse and
unfair competition claims and adjusted the award as it deemed appropriate. The award of
costs and attorney’s fees did not contravene legislative policy.
                                              III
       Milestone argued to the arbitration panel that Daniel should be ordered to pay the
costs and attorney’s fees personally. Milestone claims Daniel knew Arletha was mentally
competent when she entered into the loans and settlement agreement and when she
allowed Kevin to use the money, but Daniel nevertheless testified that she was not
mentally competent. Milestone also claimed Daniel miscategorized the case as consumer
arbitration when he knew it was commercial arbitration. According to Milestone, this
constituted mismanagement or bad faith and allowed the arbitration panel to award costs

                                               8
and attorney’s fees against Daniel personally under section 1026, subdivision (b) and
Probate Code section 1002. The arbitration panel considered the arguments and declined
to exercise its discretion to award costs and attorney’s fees against Daniel in his personal
capacity. It determined that the claims were not frivolous and Daniel’s actions were not
unreasonable.
       Here, Milestone does not contend the arbitration panel’s determination about costs
and attorney’s fees was erroneous. However, Milestone asserts we should order Daniel,
both as conservator and in his personal capacity, to pay Milestone’s costs and attorney’s
fees for this appeal.
       Milestone is entitled to an award of costs and attorney’s fees under the subject
agreements and statutes, and that applies on appeal as well. (Marcus & Millichap Real
Estate Investment Brokerage Co. v. Woodman Investment Group (2005) 129 Cal.App.4th
508, 513; §§ 1033.5, subd. (a)(10)(A); 1293.2.) However, we decline to award costs and
attorney’s fees against Daniel in his personal capacity.
                                      DISPOSITION
       The order confirming the arbitration award is confirmed. Milestone is awarded its
costs, including attorney’s fees, on appeal. (Cal. Rules of Court, rule 8.278(a) & (c).)

                                                     /S/
                                                  MAURO, J.

We concur:

    /S/
HULL, Acting P. J.

    /S/
KRAUSE, J.

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