Monday, October 2, 2006
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Court: Emotional Distress Not ‘Bodily Injury’ Within Arbitration Exclusion in Home Purchase Contract
By a MetNews Staff Writer
Emotional distress claims do not qualify as a “bodily injury” within the meaning of an arbitration exclusion in a residential purchase agreement, this district’s Court of Appeal ruled Friday.
Div. One reversed an order by now-retired Los Angeles Superior Court Judge Rodney E. Nelson denying Coldwell Banker Residential Brokerage Company’s motion to compel arbitration in a failure to disclose action.
Justice Robert M. Mallano, writing for the court, said:
“[I]f emotional distress were considered a bodily injury, the arbitration exclusion in the Agreement could apply in virtually every dispute, rendering the arbitration provision a nullity.”
Coldwell Banker acted as brokers for homebuyers Kenny Gravillis Jr. and his wife, Deanna Gravillis, in their purchase of a Los Angeles house. At the close of sale negotiations, the couple signed a preprinted California Association of Realtors residential purchase agreement. The contract included an arbitration provision that encompassed all disputes arising out of the property purchase, except actions for bodily injury or wrongful death.
After they bought the home, the Gravillises hired a contractor to remodel the residence before they moved in. While working on the property, the contractor discovered that it had suffered severe termite damage that had been cosmetically concealed.
The couple sued Coldwell Banker alleging that it failed to disclose known defects in the residence, including that it had been structurally damaged and rendered uninhabitable by termite infestation. Among other allegations, they maintained that learning of the damage and the considerable costs of rebuilding, caused them severe stress, worry, depression, anxiety and fear.
Deanna Gravillis, who was pregnant at the time, claimed that she was distressed on being advised to wear a mask and special clothing while on the property, in order to protect herself and her unborn child from exposure to fungus, dry rot, and other hazardous substances. She further claimed that the emotional pressure caused her to develop gestational diabetes, a departure from her previously healthy condition.
Coldwell Banker filed a motion to compel arbitration, which the Gravillises opposed on the ground that they were seeking damages for bodily injury within the meaning of the arbitration exclusion. Nelson initially granted the broker’s motion, but denied it on reconsideration two months later, concluding that the homeowners’ claims fell under the category of bodily injury.
But Mallano disagreed:
“[A] party to a home purchase agreement would not reasonably expect that, as used in the agreement, ‘bodily injury’ would include diabetes caused by emotional distress which, in turn, is caused by learning about termite damage. More likely, the parties would expect ‘bodily injury’ to mean physical conditions—a bruise, cut, fracture, or concussion—caused directly by a falling beam, a collapsing wall, a cracked floor, or a broken fixture.”
The gist of the Gravillises’ action was the nondisclosure of termite damage prior to execution of the purchase agreement, which is an item expressly covered by the agreement’s arbitration clause, the justice said.
He also noted:
“[S]ome degree of emotional distress attends most, if not all, home purchases.”
Justice Frances Rothschild concurred in the opinion, and Justice Miriam A. Vogel concurred in the judgment only.
Coldwell Banker’s attorneys on appeal were in-house counsel Robert J. Shulkin, and Bruce M. Thornton and Carlos V. Yguico of Gemmill Thornton & Baldrige. Plaintiffs’ appellate counsel were James S. Link, Robin L. Haulman, and Diane Corwin.
The case is Gravillis v. Coldwell Banker Residential Brokerage Company, B182588.
Copyright 2006, Metropolitan News Company