A dispute arose between petitioner Zari Mansouri and her homeowners association, the Fleur du Lac Estates Association (Association), after Mansouri remodeled her condominium's patio. The Association obtained a court order compelling arbitration of the dispute under an arbitration provision contained in the Second Restated Declaration of Covenants, Conditions and Restrictions for the Association (CC&R's). The trial court awarded attorney fees to the Association for its expense in bringing the petition to compel arbitration. We granted an alternative writ in this mandamus proceeding to consider (1) whether the arbitration provision in the CC&R's is unenforceable and unconscionable; (2) if the arbitration provision is valid, whether this dispute falls outside of the scope of the arbitration provision; and (3) whether the Association complied with the applicable statutory requirements for a petition to compel arbitration. We conclude the
THE ASSOCIATION FAILED TO COMPLY WITH THE APPLICABLE STATUTORY REQUIREMENTS FOR A PETITION TO COMPEL ARBITRATION
Prior to filing the petition to compel arbitration, the Association wrote Mansouri requesting that she agree to submit the dispute to binding arbitration before a single arbitrator, unilaterally preselected by the Association. The letter indicated that if Mansouri did not agree, the Association would file "a court action for injunctive and declaratory relief and attorneys fees to enforce [her] compliance." (Italics added.) The letter made no reference to the arbitration provision of the CC&R's (section 16.10), did not offer the three person form of arbitration set forth in section 16.10, and did not inform Mansouri that a petition to compel arbitration would be filed if she refused.
Mansouri claims the trial court erred in granting the Association's motion to compel arbitration because the Association failed to properly satisfy its
Section 1369.520, subdivision (a), reads: "An association or an owner or a member of a common interest development may not file an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution pursuant to this article." Subdivision (b) of section 1369.520, however, limits the application of the section "to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits stated in Sections 116.220 and 116.221 of the Code of Civil Procedure."
Section 1369.520, subdivision (a) does not apply to this case; the Association did not file "an enforcement action" as defined by section 1369.520. (§ 1369.520, subd. (b).) Although the Association threatened to file a court action for injunctive and declaratory relief in its letter to Mansouri offering arbitration, it subsequently took the position that the dispute fell within the binding arbitration provisions of the CC&R's, section 16.10, and filed the petition to compel arbitration that is the subject of this writ. The applicable statutory provision for the Association's petition to compel arbitration is not Civil Code section 1369.520, but Code of Civil Procedure section 1281.2.
Subject to exceptions not applicable here, section 1281.2 provides that: "On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists...." (Italics added.)
We requested and received supplemental briefs from the parties addressing whether a demand for arbitration under the parties' agreement to arbitrate and a party's refusal to arbitrate under the agreement are preconditions of a petition to compel arbitration under section 1281.2.
However, this rule is discretionary with the reviewing court and subject to several exceptions. (Watson v. Department of Transportation (1998) 68 Cal.App.4th 885, 890 [80 Cal.Rptr.2d 594].) First, "[t]he general rule confining the parties upon appeal to the theory advanced below is based on the rationale that the opposing party should not be required to defend for the first time on appeal against a new theory that `contemplates a factual situation the consequences of which are open to controversy and were not put in issue or presented at the trial.' [Citation.]" (Ward v. Taggart (1959) 51 Cal.2d 736, 742 [336 P.2d 534].) Consequently, "an appellate court may allow an appellant to assert a new theory of the case on appeal where the facts were clearly put at issue at trial and are undisputed on appeal." (Richmond v. Dart Industries, Inc., supra, 196 Cal.App.3d at p. 879.) Second, a "`court may refuse to follow the doctrine where the error is too fundamental to be ignored, e.g., in cases of illegality, unclean hands, complete failure to state a cause of action, or variance so fundamental as to constitute "departure" or failure of proof.
In the trial court, Mansouri opposed the petition to compel arbitration on the ground, inter alia, that the Association did not in good faith endeavor to submit this dispute to alternative dispute resolution under section 1369.520. In making this argument, Mansouri specifically contended the Association's offer of binding arbitration by a single arbitrator contradicted her right under the CC&R's to a panel of three arbitrators. This argument placed at issue the facts surrounding the Association's request for arbitration and its subsequent communications and negotiations with Mansouri regarding possible arbitration. The Association was on notice from that point that Mansouri claimed the Association improperly offered her arbitration only by a preselected single arbitrator. In its reply to Mansouri's opposition, however, the Association never asserted it had in fact offered arbitration with a panel of three arbitrators under the terms of section 16.10. The Association never submitted the supplemental evidence, which it now claims it has, that would show Mansouri and/or her counsel believed the Association's letter demanding arbitration before a preselected single arbitrator "represented the Association's intent to submit the dispute to a three-arbitrator panel for resolution" or that it otherwise "informed Mansouri of its willingness to arbitrate either through a three-person panel or through a single arbitrator." Given the plain relevance of such evidence to Mansouri's claim, we discount the Association's belated effort here to suggest in a footnote in its supplemental brief that the factual situation surrounding its request for arbitration is disputed and that it somehow had no opportunity to fully present its evidence to the trial court. On this record, the facts were clearly put at issue at trial and are undisputed here.
In any event, if proof of a demand and refusal to arbitrate under the agreement is a necessary prerequisite to a petition to compel arbitration under section 1281.2, the failure to prove such demand and refusal is a failure to state a cause of action—a fundamental error that permits us to review the issue despite a party's failure to raise the theory in the trial court. (Watson v. Department of Transportation, supra, 68 Cal.App.4th at p. 890.)
We turn to the merits of the issue and conclude section 1281.2 does require a party seeking to compel arbitration to plead and prove a prior demand for arbitration under the parties' arbitration agreement and a refusal to arbitrate under the agreement.
The Association nevertheless asks us to find "that Mansouri's conduct in these proceedings operates as a waiver to this requirement and/or excuses [the] Association from complying with any such preconditions." According to the Association, Mansouri unmistakably demonstrated her unwillingness to submit the dispute to any form of binding arbitration in her responses to the Association's requests to arbitrate. We have reviewed the referenced letter and e-mail exchanges between the parties regarding arbitration and mediation. In our opinion, Mansouri's expressed desire in those communications for the matter to be litigated in court and not submitted to binding arbitration must be understood in context as a preference for a judicial forum over the single preselected arbitrator offered by the Association. We do not view it as evidence of Mansouri's "unequivocal intent ... to reject any form of binding arbitration." We are not convinced by these communications that Mansouri would have rejected arbitration under section 16.10 of the CC&R's if arbitration pursuant to the terms of such provision had been offered prior to the filing of the petition to compel arbitration. The Association's failure to offer and request arbitration pursuant to section 16.10 is not waived or excused.
Let a peremptory writ of mandate issue, directing the trial court to vacate its order granting the Association's petition to compel arbitration and awarding attorney fees and to enter a new and different order denying the petition. Petitioner is awarded costs in this writ proceeding. (Cal. Rules of Court, rule 8.493(a)(1)(A).)
Blease, Acting P. J., and Raye, J., concurred.