Court Opinion

ID: 4792049
Source: CourtListenerOpinion
Date Created: 2021-08-19 20:06:11.014618+00
Date Added: 2024-06-11T08:09:49.709215
License: Public Domain

Filed 8/19/21 Shepherd v. Altman CA2/8
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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has not been certified for publication or ordered published for purposes of rule 8.1115.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

                         SECOND APPELLATE DISTRICT

                                      DIVISION EIGHT

 PAUL SHEPHERD et al.,                                            B300464

           Plaintiffs and Respondents,                            (Los Angeles County
                                                                  Super. Ct. No. BC696247)
           v.

 JOSHUA ALTMAN et al.,

           Defendants and Appellants.

      APPEAL from an order of the Superior Court of Los
Angeles County, David Sotelo, Judge. Affirmed.
      Manning & Kass, Ellroad, Ramirez, Trester; Frederic W.
Trester, Steven J. Renick and Ari L. Markow for Defendants and
Appellants.
      Allen Matkins Leck Gamble Mallory & Natsis, Scott J.
Leipzig and Nancy S. Fong for Plaintiffs and Respondents.

                                    ____________________
       Paul and Gigi Shepherd signed a commission agreement
with Joshua Altman of the real estate brokerage firm Douglas
Elliman. The Shepherds filed suit alleging breach of the
agreement. Altman and Douglas Elliman moved to compel
arbitration based on an arbitration clause in the agreement. The
trial court denied the motion because it found the Shepherds
established fraud in the execution of the agreement. Altman and
Douglas Elliman appeal, contending no substantial evidence
supported the trial court’s decision. We affirm.
                                  I
       We recount the background.
       The Shepherds inherited two parcels of land on Sunset
Plaza Drive in the Hollywood Hills area of Los Angeles. They
decided to sell the property. Neither had owned or sold property
before, so they hired an attorney. They also met with Altman, a
self-proclaimed celebrity real estate agent who worked at
Douglas Elliman. The Shepherds understood if Altman brought
them a buyer, he would act as a dual agent, representing them
and the buyer.
       On March 4, 2017, Altman brought Nick Keros, a potential
buyer, to see the property. The Shepherds were not aware
Altman and Keros were close friends and had been involved in
many previous business dealings together.
       The next evening, Altman called the Shepherds and
demanded they meet with Keros that evening. He insisted if they
did not meet that evening, Keros would lose interest in the
property. The Shepherds were reluctant and said they were
exhausted after a day of outdoor activity. Eventually they gave
in, not wanting to lose a potential buyer.

                               2
      Keros and Altman brought a pre-printed purchase
agreement and commission agreement to the Shepherds. Over
the course of the night, Keros and Altman made handwritten
deletions and additions to the purchase agreement. Keros and
Altman also drafted a handwritten addendum. The agreement
and addendum were hard to read. The Shepherds asked
questions and pointed out clauses with which they were not
comfortable. One clause was about an easement. The Shepherds
made clear they did not have the easement and could not control
whether their neighbor would grant it. Altman and Keros
represented to the Shepherds the purchase agreement and
addendum were nonbinding drafts and told the Shepherds not to
worry about the details. Altman also pointed to language
referencing the Shepherds’ attorney and stated the attorney
would be able to review the agreements.
      In the end, Altman told the Shepherds to sign the “draft”
purchase agreement and commission agreement. Believing
Altman’s and Keros’s representations the documents were drafts
subject to revision, the Shepherds signed the documents. Altman
and Keros left without giving the Shepherds copies. When the
Shepherds received copies about a week later, they believed
additional handwritten language had been added to the
documents.
      Altman and Keros later took the position the agreements
were binding. Keros eventually filed suit against the Shepherds
for specific performance under the purchase agreement.
      The Shepherds brought their own suit, which is the suit
underlying this appeal. This suit was against Altman and
Douglas Elliman for breach of contract, breach of fiduciary duties,

                                3
negligence, and fraud. We refer to Altman and Douglas Elliman
collectively as “Altman.”
       Altman moved to compel arbitration based on an
arbitration clause in the commission agreement. Altman
included no evidence relating to or seeking to rebut the
Shepherds’ allegations in the complaint about fraud.
       The Shepherds opposed the motion, arguing the agreement
was void due to fraud in the execution. The Shepherds submitted
declarations detailing the representations made by Altman that
the documents were only drafts. Paul Shepherd attached to his
declaration the documents the Shepherds signed on March 5,
2017, including the purchase agreement and the commission
agreement.
       In his reply, Altman argued the Shepherds claimed fraud
in the execution of the purchase agreement, but not the
commission agreement. Two days later, the Shepherds filed
“supplemental declarations” clarifying that Altman had
represented all the documents they signed that night—which the
Shepherds had attached to their original declarations and which
included the purchase agreement and the commission
agreement—were drafts.
       The next day Altman filed objections to the supplemental
declarations, arguing they were untimely and violated Altman’s
due process rights.
       At the hearing, the trial court stated it had not seen the
objections and asked Altman’s counsel the basis for the objections
to the supplemental declarations. Counsel stated, “It was late.”
The court overruled the objections and heard argument on the
merits.

                                4
       The trial court denied the motion to compel arbitration.
The trial court found the Shepherds’ version of events was
credible and Altman’s was not. The trial court found the
commission agreement and the purchase agreement were part of
the same package and that the Shepherds had established fraud
in the execution of the agreements.
       Altman appeals.
                                  II
       Substantial evidence supports the trial court’s finding there
was fraud in the execution of the agreements. Before we discuss
the sufficiency of the evidence, however, we address Altman’s
argument the trial court erred in considering the Shepherds’
supplemental declarations.
                                  A
       Altman argues the trial court improperly relied on the
Shepherds’ supplemental declarations without giving him a
chance to respond to this new evidence. This argument errs
because Altman never asked for that chance.
       A trial court has discretion to consider evidence filed with
or after a reply. (See Cal. Rules of Court, rule 3.1300(d); Alliant
Ins. Services, Inc. v. Gaddy (2008) 159 Cal.App.4th 1292, 1307–
1308.) As long as the opposing party has an opportunity to reply,
there is no due process issue. (See Plenger v. Alza Corp. (1992)
11 Cal.App.4th 349, 362, fn. 8.)
       Here, Altman filed objections and had the opportunity to
argue his objections to the court. Although the objections
conclusorily stated he had not had time to review the
declarations (which were virtually identical and only four
paragraphs long), he never requested more time. Altman did not
ask for the opportunity to submit responsive briefing or evidence.

                                 5
We reject Altman’s unsupported assertion the court must offer
such relief on its own motion. Altman asked the court only to
strike the evidence, which the trial court, in its discretion,
declined to do. This was proper.
                                   B
       Having determined the trial court properly considered the
Shepherds’ supplemental declarations, we now turn to the
question of whether substantial evidence supports its finding
there was fraud in the execution that justified denying the
motion to compel arbitration.
       There was substantial evidence.
       We defer to the trial court’s credibility findings and resolve
evidentiary conflicts in favor of the trial court’s decisions.
       Altman does not argue federal arbitration law applies;
indeed, the term “federal” does not appear in Altman’s briefs.
       California law favors enforcement of valid arbitration
provisions. (Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83, 97.) To prevail on a motion to
compel arbitration, the moving party bears the burden of
establishing a valid agreement to arbitrate. (Rosenthal v. Great
Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413
(Rosenthal).) The parties do not dispute Altman put a signed
agreement into evidence.
       The burden thus shifted to the Shepherds to prove their
defense of fraud in the execution. (Rosenthal, supra, 14 Cal.4th
at p. 413.) As the Shepherds acknowledge, a defense of fraud in
the execution requires them to prove (1) Altman made a
misrepresentation the Shepherds relied on; and (2) the
Shepherds acted in an objectively reasonable and non-negligent
manner in relying on that representation. (Id. at p. 423.)

                                  6
       Substantial evidence supports the trial court’s findings on
both elements.
       First, Altman indeed made a misrepresentation on which
the Shepherds relied: that the documents the Shepherds signed
were nonbinding drafts. The Shepherds testified in their
supplemental declarations that Altman told them the documents
they signed that night were nonbinding drafts. The trial court
found their testimony credible. We defer to the trial court’s
credibility determinations.
       Second, substantial evidence showed the Shepherds were
not negligent in relying on Altman’s misrepresentation. This
element puts Altman in a peculiar position. This element
effectively requires Altman to maintain that he personally and
his firm generally are of such well-known low repute that no one
taking ordinary care would trust them. Unsurprisingly, Altman
does not press this point.
       Altman’s misrepresentation that the papers were
nonbinding drafts essentially was Altman’s promise to the
Shepherds that Altman would never try to enforce the signed
papers, that their signatures were needed only as a show of good
faith to keep the negotiation process moving forward. In this
context, reading the terms of the proposed contract would not
matter if one believed Altman’s promise not to try to hold the
Shepherds to these terms as written today. A draft is a draft.
Let us keep going with our agreement to agree. We have made
good progress here tonight. All signs are good. Full speed ahead.
       The Shepherds were unsophisticated in matters of real
estate. They had never bought or sold a house before. Now, due
to a fortunate inheritance, they owned property worth millions.
Aware of their own inexperience, they engaged an attorney to

                                7
advise them in the process. Altman knew about their attorney
and assured them the attorney would have the chance to review
the agreement before the draft became final. To all appearances,
Altman came from a reputable firm and personally enjoyed a
good reputation. Altman himself was a self-proclaimed celebrity
realtor. He was involved with some sort of real estate television
show.
       Altman has submitted no evidence contradicting the
Shepherds’ account of events. Altman points to no evidence of
warning signs that would put a reasonable person on notice about
a possible lack of integrity.
       Substantial evidence supports the trial court’s finding the
Shepherds were not negligent in relying on Altman’s
misrepresentation.
                                   III
       Altman argues even if there was fraud in the execution, the
Shepherds’ first cause of action for breach of the commission
agreement is subject to arbitration. This argument is incorrect.
Altman asserts that, by bringing a breach of contract claim, the
Shepherds have conceded the commission agreement is valid and
enforceable. Therefore, the arbitration clause is also valid and
enforceable as to this cause of action. This does not follow. The
trial court found, and we affirm, there was fraud in the execution
of the commission agreement. This fraud vitiated the contract:
the minds never met. Lacking a contract for arbitration, Altman
is not entitled to force arbitration on the Shepherds.

                                8
                      DISPOSITION
     We affirm and award costs to respondents.

                                       WILEY, J.
We concur:

             GRIMES, Acting P. J.

             STRATTON, J.

                               9