HARRIS, et al. vs 5 STAR HOUSING LLC, et al.

22CV012731: HARRIS, et al. vs 5 STAR HOUSING LLC, et al. 08/28/2026 Hearing on Motion to Confirm Arbitration Award filed by Paul Harris (Plaintiff) + CRS# 473892306873 in Department 24

Tentative Ruling - 08/27/2026 Rebekah Evenson

PARTIES TO APPEAR

The hearings on these petitions were continued from the prior hearing date of July 30 for supplemental briefing addressing whether the arbitrator exceeded her powers. The Court has considered the parties’ supplemental briefing.

As a preliminary matter, the Court rejects Defendants’ argument that their Petition to Vacate or Correct the Arbitration Award should be deemed admitted pursuant to Code of Civil Procedure section 1290 because Plaintiffs did not file their opposition within the 10 day timeframe permitted by Code of Civil Procedure section 1290.6. Defendants are correct that Plaintiffs did not file their opposition brief until June 12, 76 days after Defendants filed their Petition to Vacate or Correct Arbitration Award on March 24. However, Plaintiffs filed their Petition to Confirm Arbitration Award on March 25, one day after Defendants filed their Petition to Vacate or Correct Arbitration Award. Plaintiffs, therefore, timely filed and served notice on Defendants that they did not admit that the arbitration award should be vacated or corrected.

The exclusive grounds for vacating an arbitration award are set forth in Code of Civil Procedure section 1286.2, and the exclusive grounds for correcting an arbitration award are set forth in Code of Civil Procedure section 1286.6. (See Soni v. SimpleLayers Inc. (2019) 42 Cal.App.5th 1071, 1085-1086.) Courts will not review an arbitration award based on purported errors in the arbitrator’s legal reasoning or the sufficiency of the evidence supporting the award. (Id. at 1086- 1087.)

Defendants’ Petition to Vacate or Correct Arbitration Award sets forth five independent grounds for vacating or correcting the arbitration award. (See Petition, pages 6-7.) Of those five grounds, grounds 2-5 allege that the arbitrator made legal errors (in considering estimates from unlicensed contractors, in awarding duplicative damages, in not considering Plaintiffs’ alleged failure to mitigate damages, and in not awarding one of the two Defendants his attorneys’ fees for defeating the breach of contract claim.) None of these purported errors are grounds to vacate or correct the arbitration award. (See Soni, supra, 42 Cal.App.5th at 1086-1087, as well as Code of Civil Procedure sections 1286.2 and 1286.6.)

The sole ground raised by Defendants that would be a basis to vacate or correct the arbitration award is ground 1, in which Defendants assert that that the arbitrator exceeded her powers by awarding $200,000 damages on a square footage diminution theory that was not properly presented for arbitration. Where an arbitrator awards remedies and claims for which the parties did not have reasonable notice, the arbitrator may be found to exceed her powers. (See, e.g., Emerald Aero LLC v. Kaplan (2017) 9 Cal.App.5th 1125, 1140-1142.) 22CV012731: HARRIS, et al. vs 5 STAR HOUSING LLC, et al. 08/28/2026 Hearing on Motion to Confirm Arbitration Award filed by Paul Harris (Plaintiff) + CRS# 473892306873 in Department 24 It is not entirely clear whether the award of $200,000 for “diminution in appraised value” is based on the square footage theory, as opposed to the theory that the undisclosed defects (flooding, fire damage and trespasser) reduced the fair market value of the property.

Although the arbitration decision states that Plaintiffs’ appraisal expert Tony Machado’s testimony regarding diminution of value was “significantly influence[ed]” by “the discrepancy in square footage,” the arbitrator does not state that this is the only basis for Machado’s opinion. Nor does the decision state that the arbitrator relied on Machado’s opinion or the square footage diminution theory in determining the amount awarded for diminution in value. To the contrary, damages are generally awarded only for violations that are established, and the arbitrator found defendants’ liable based on three failures to disclose: failure to disclose the sump pump and water intrusion, failure to disclose the attic fire, and failure to disclose the presence of Zeitz.

The arbitrator did not identify the square footage discrepancy as a basis for determining liability and the Court is reluctant to find that the arbitrator nonetheless relied on the square footage discrepancy as a basis for damages.

On the other hand, the only evidence identified by the arbitrator relating to diminution of value was the testimony of Plaintiffs’ expert appraiser Tony Machado. Machado’s opinion of the property’s market value was “significantly influenc[ed]|” by the difference between the gross living space reported in the MLS listing and the gross living space he measured (which apparently did not include the basement bonus room.) (See Final Arbitration Award, page 7 line 26 – page 8 line 3.) Machado testified that the property’s material defects that Defendants allegedly failed to disclose (inoperable sump pump, water intrusion, fire damage, presence of Zeitz) were not part of his appraisal, and the cost to cure those material defects should be deducted from the value of the property. (Id.)

In the Final Arbitration Award, the arbitrator awarded damages for diminution in value based on $200,000 for the diminution in appraised value, and $29,100 for cost to cure material defects. As explained above, Plaintiffs’ expert appraiser Machado apportioned the damages based on the appraised value (which in turn, was “significantly influenc[ed]” by the difference between the gross living space reported in the MLS listing and the gross living space measured by Machado) and the cost to cure material defects. The $200,000 awarded for diminution in appraised value, therefore, may be based on the square footage diminution theory. Plaintiffs point to no other evidence presented that would support a claim for diminution in appraised value (as opposed to diminution in value based on the cost to cure material defects, for which the arbitrator separately awarded damages.)

If the arbitrator’s award were based on diminution in value because of the square footage discrepancy, it was likely in excess of her authority because Plaintiff had not properly or timely notified Defendants that they were seeking damages based on a square footage diminution theory.

Defendants argue they had no notice prior to submission of Plaintiffs’ closing brief, and after the close of evidence, that Plaintiffs were seeking an award of damages based on a square footage

SUPERIOR COURT OF CALIFORNIA COUNTY OF ALAMEDA

22CV012731: HARRIS, et al. vs 5 STAR HOUSING LLC, et al. 08/28/2026 Hearing on Motion to Confirm Arbitration Award filed by Paul Harris (Plaintiff) + CRS# 473892306873 in Department 24 diminution theory.

Plaintiffs do not contend that this theory of recovery was identified in their Complaint, but they contend (at page 10 of their opposition brief), that Defendants were advised of this claim multiple times prior to and during the arbitration. Specifically, in their supplemental briefing, Plaintiffs identify three occasions in which they purportedly notified Defendants that they were seeking damages based on a square footage diminution theory. None of these record citations support that contention.

First, in their (essentially identical) responses to Special Interrogatories Set One, No. 28, served on June 21, 2024, Plaintiffs were asked to state the amount of damages they claimed, and they included $276,000 for “House comparable difference (average)”. In addition, Plaintiffs’ responses to Special Interrogatories Nos. 10, 13, 16 asserted that Defendants “are fully liable for the diminution in the Subject Property’s value and the repair costs associated with these undisclosed material defects.” However, nowhere in any of these responses did Plaintiffs state that the “undisclosed material defects” included a differential in square footage between the house as listed and the house Plaintiffs received. “House comparable difference (average)” does not mention square footage diminution or state that the square footage is the “comparable difference” to which Plaintiffs refer.

Second, in her deposition on July 9, 2024, Plaintiff April Hernandez was asked if her agent told her that the house’s bonus room was not included in the square footage. Hernandez appeared to testify that her agent had not told her that, based on information he received from Defendants. (Hernandez deposition at pages 13-14.) Hernandez did not state that Plaintiffs were seeking damages based on anything pertaining to the square footage of the bonus room. Later in her deposition, at pages 66-67, Hernandez stated that her damage claim was based on “comparables to a home with similar square footage, similar number of rooms in a worse neighborhood than what we closed on.” But Hernandez did not say whether or not she was including the bonus room in the “similar square footage” analysis.

To the contrary, her testimony seemed to be based on “a comparable house that does not contain the same defects”. Hernandez did not identify the square footage of the bonus room as a “defect”.

Third, Plaintiffs refer to page 15 of the transcript of their opening statement at the arbitration hearing on December 9, 2024, in which counsel indicated that “the final area of damage and defect” was the basement, which he described as “a pit underneath the subfloor of the home” with a disassembled sump pump and no drainage system that filled with water when it rained and weakened the foundation. Counsel also argued that the bonus room was “marketed in a way that makes it seem like it is an additional square footage that is immediately able to be used by purchaser”.” However, his argument can reasonably be interpreted as a claim that Plaintiffs’ damage was not based on the square footage of the basement, but rather on the fact that the basement is not properly marketed as a bonus room because it floods, causes water intrusion, and weakens the foundation.

SUPERIOR COURT OF CALIFORNIA COUNTY OF ALAMEDA

22CV012731: HARRIS, et al. vs 5 STAR HOUSING LLC, et al. 08/28/2026 Hearing on Motion to Confirm Arbitration Award filed by Paul Harris (Plaintiff) + CRS# 473892306873 in Department 24 The Court concludes that none of the discovery responses, deposition testimony, or arguments made in the arbitration opening statement gave Defendants reasonable notice that Plaintiffs were seeking damage based on a square footage diminution theory.

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