Davis v. CadenaCreekMobileHomePark

Filed 8/3/07 Davis v. Cadena Creek Mobile Home Park CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of San Bernardino County. A. Rex Victor, Judge. Affirmed.

Berger Kahn, Arthur Grebow, and Julie H. Rubin for Defendants and Appellants.

Stuart M. Parker for Plaintiffs and Respondents.

On March 27, 2006, plaintiffs Theodore and Nancy Davis filed a petition to confirm an arbitration award. Defendants Cadena Creek Mobile Home Park, Lake Cadena Investments, Ltd., and Mobile Community Management Co., opposed the motion. On May 31, 2006, the trial court granted the motion and subsequently rendered its judgment confirming the award. Plaintiffs were awarded restitution damages of $10,034.12, prejudgment interest of $1,847.30, and attorney fees of $54,890.

Defendants appeal. They contend the arbitrator exceeded his power by awarding attorney fees to the plaintiffs, that plaintiffs claims were barred by the statute of limitations, and that plaintiffs claims were barred by the doctrine of unclean hands.

I. ARBITRATORS AWARD

On March 14, 2006, an arbitrator issued his decision in this case. The arbitrator found that plaintiffs purchased a mobile home from a dealer in September 2000, and leased a space for it in Cadena Creek Mobile Home Park. The lease term was for 10 years at a rent of $410 per month. However, pursuant to an agreement with the dealer, the mobile home park offered plaintiffs a promotional rent starting at $160 per month with subsequent increases. The primary issue before the arbitrator was whether the subject lease was exempt from the Colton rent control statute under Civil Code sections 798.17 and 798.18. After a hearing, the arbitrator found that the lease was not exempt from the Colton rent control statute. Applying that statute, the arbitrator awarded restitution damages of $10,034.12, plus prejudgment interest of $1,847.32.

The arbitrator also considered three defenses raised by defendants: the statute of limitations, the doctrine of unclean hands, and other equitable issues. After rejecting these asserted defenses, the arbitrator found that plaintiffs were the prevailing parties within the meaning of arbitration provisions in the lease and in an addendum to the lease agreement. The arbitrator therefore awarded plaintiffs attorney fees of $54,890, plus $2,845.35 in costs.

II. THE PETITION TO CONFIRM THE ARBITRATORS AWARD

On March 27, 2006, plaintiffs filed their petition to confirm the award under Code of Civil Procedure section 1285 et seq.^[1]Defendants filed their response and asked that the petition be denied, arguing that the arbitrator exceeded his powers by awarding attorney fees. Defendants also argued that plaintiffs claims were barred by the statute of limitations and the doctrine of unclean hands.

The petition was heard on May 11, 2006. The trial court first noted that it should confirm the award unless it found grounds for correcting or vacating it. ( 1286.) The court then reviewed the grounds for vacating an award and found that no showing had been made of any of the grounds stated in section 1286.2. The trial court also found that the arbitrator did not exceed his powers in awarding attorney fees under the lease and the lease addendum. It pointed out that the arbitrator had considered the attorney fee issue, and other issues raised by defendants. It cited Horn v. Gurewitz (1968) 261 Cal.App.2d 255: Neither the merits of the dispute nor the sufficiency of the evidence are reviewable by either a trial or an appellate court, and it is presumed that all issues in the dispute were heard and decided by the arbitrators [citations]. (Id. at pp. 261-262.)

III. SUFFICIENCY OF DEFENDANTS RESPONSE TO THE PETITION

Before discussing defendants arguments, we first consider plaintiffs argument that this appeal should be dismissed because defendants failed to file an adequate response to the petition to confirm the award.

As noted above, the defendants response only asked that the petition be denied. It did not ask that the award be vacated or corrected, as required by sections 1286.4 and 1286.8. In this regard, section 1285.2 states: A response to a petition under this chapter may request the court to dismiss the petition or to confirm, correct or vacate the award. The response here did not do so, and plaintiffs contend the error is fatal.

Although the response did not technically conform to the statutes, we agree with defendants that the parties and the trial court clearly understood that defendants were attacking the merits of the award.

Defendants cite MacDonald v. San Diego State University (1980) 111 Cal.App.3d 67. In discussing a similar response the court said: Considering section 1286.8 and the facts before us, it is quite clear there was no request for correction as contemplated by subdivision (a). Under the alternative of subdivision (b) however, viewing [San Diego State Universitys] response liberally (see Code Civ. Proc.,  452), the prayer for dismissal may be deemed to be the equivalent of a request the award be vacated. There is no question all parties were before the court as contemplated in paragraph (1) of subdivision (b). Accordingly, section 1286.8 does not necessarily represent a bar to correction of the award as MacDonald suggests (but see Davis v. Calaway (1975), 48 Cal.App.3d 309, 311 . . . , not allowing a request to dismiss to circumvent time limit for request to vacate or correct). (Id. at p. 80.)

Although plaintiffs rely on Knass v. Blue Cross of California (1991) 228 Cal.App.3d 390, no petition to correct or vacate was filed in that case. The court held that the award could not be attacked for the first time on appeal because to do so would allow parties to use the appeal to circumvent the time limits for filing a petition to correct or vacate the award.

We agree with defendants that some degree of liberality in interpreting the response to the petition should be applied when all parties were before the court, no timing issues were presented, there was no misunderstanding of the issues by the parties, defendants argued that the arbitrator exceeded his power under section 1286.2, and the trial court clearly addressed the issues raised by defendants. Dismissing the appeal on this basis would not further the cause of justice ( 452), and we therefore decline to dismiss the appeal on this ground.

IV. THE AWARD OF ATTORNEY FEES

Defendants argue that the trial court exceeded its powers by awarding attorney fees to plaintiffs. They rely on Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362. In that case, our Supreme Court began by stating the applicable general principles: California law allows a court to correct or vacate a contractual arbitration award if the arbitrators exceeded their powers. [Citations.] In Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 28 . . . , we held arbitrators do not exceed their powers merely by erroneously deciding a contested issue of law or fact; we did not, however, have occasion there to further delineate the standard for measuring the scope of the arbitrators authority. This case requires us to decide the standard by which courts are to determine whether a contractual arbitrator has exceeded his or her powers in awarding relief for a breach of contract. (Id. at p. 366.)

The court also summarized its ruling: We conclude that, in the absence of more specific restrictions in the arbitration agreement, the submission or the rules of arbitration, the remedy an arbitrator fashions does not exceed his or her powers if it bears a rational relationship to the underlying contract as interpreted, expressly or impliedly, by the arbitrator and to the breach of contract found, expressly or impliedly, by the arbitrator. The remedy fashioned by the arbitrator here was within the scope of his authority as measured by that standard. (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 367.)

Defendants argue that the courts have ultimate authority to overturn awards if a remedy is unauthorized or if the arbitrator decides an unsubmitted issue. As our Supreme Court said in Advanced Micro Devices, Inc., We do not, by the above, intend to suggest an arbitrators exercise of discretion in ordering relief is unrestricted or unreviewable. Such an extreme position enjoys no support in our statutes or cases. The powers of an arbitrator derive from, and are limited by, the agreement to arbitrate. [Citation.] Awards in excess of those powers may, under sections 1286.2 and 1286.6, be corrected or vacated by the court. Unless the parties have conferred upon the arbiter the unusual power of determining his own jurisdiction [citation], the courts retain the ultimate authority to overturn awards as beyond the arbitrators powers, whether for an unauthorized remedy or decision on an unsubmitted issue. (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 375.)

To define an award in excess of the arbitrators powers, defendants turn to Jordan v. Department of Motor Vehicles (2002) 100 Cal.App.4th 431: An arbitrator exceeds his powers when he acts without subject matter jurisdiction [citation], decides an issue that was not submitted to arbitration [citations], arbitrarily remakes the contract [citation], upholds an illegal contract [citation], issues an award that violates a well-defined public policy [citation], issues an award that violates a statutory right [citation], fashions a remedy that is not rationally related to the contract [citation], or selects a remedy not authorized by law [citations]. In other words, an arbitrator exceeds his powers when he acts in a manner not authorized by the contract or by law. (Id. at p. 443.)

Attempting to apply this standard here, defendants argue that the arbitrator exceeded his powers by awarding attorney fees and ignoring defenses based on undisputed evidence.

The problem with defendants argument is that both the lease and the addendum to the lease in this case contain an attorney fees clause drafted by defendants.

The lease states: In any action arising out of Residents tenancy, this Agreement, or the provisions of the Mobilehome Residency Law, the prevailing party shall be entitled to reasonable attorneys fees and costs. A party shall be deemed a prevailing party if the judgment is rendered in his favor or where the litigation is dismissed in his favor prior to or during the trial, unless the parties otherwise agree in the settlement or compromise.

The arbitration addendum to the lease states: Attorneys fees and costs incurred in any action to compel arbitration or seek injunctive relief the responding party would not in advance stipulate to, to abate subsequent dispute(s), or to confirm the arbitration award, shall be awarded to the prevailing party. Otherwise, attorneys fees and costs shall not be awarded to any party but shall be borne by each party separately. (Capitalization omitted.)

Focusing on the word action as used in the two attorney fees provisions, defendants argue that attorney fees and costs may only be awarded in judicial proceedings to compel arbitration or to confirm the arbitration award. But, as to the fees and costs incurred in the arbitration itself, defendants argue that they are to be borne equally by each party, as provided in section 1284.2.

The difficulty with defendants argument is that this issue was considered and decided by the arbitrator. The award states: Unlike a statute, a contract provision for fee recovery in an action has been held to authorize such awards in arbitration proceedings because arbitration is an expected means of enforcing the agreement. Rutter Group, California Practice Guide, Alternative Dispute Resolution (2005) 5:431; Tate v. Saratoga Savings & Loan Assn. (1989) 216 Cal.App.3d 843, 856-857.

In deciding the issue, the arbitrator was interpreting the attorney fee provisions in the lease and the lease addendum, both of which were part of the contract between the parties. Whether or not the decision was correct, it was within the power of the arbitrator to decide. Such a decision is, of course, not generally reviewable for legal or factual error. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 6.)

Nor is the decision reviewable under the facts here: It is well settled that arbitrators do not exceed their powers merely because they assign an erroneous reason for their decision. [Citations.] A contrary holding would permit the exception to swallow the rule of limited judicial review; a litigant could always contend the arbitrator erred and thus exceeded his powers. To the extent Moncharsh argues his case comes within section 1286.2, subdivision (d) merely because the arbitrator reached an erroneous decision, we reject the point. (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 28.)

Plaintiffs cite Pacific Gas & Electric Co. v. Superior Court (1993) 15 Cal.App.4th 576. In that case, a party, Anacapa, argued that the case was within the exceptions to the Moncharsh rule: Its most far-reaching claim is that an arbitration award predicated upon a qualified submission, by which the arbitrator is directed to apply the law as would a court, is reviewable for errors of law. Anacapa impliedly locates this exception in section 1286.2, subdivision (d), which directs the vacation of an award when the arbitrators exceeded their powers . . . . The argument simply put is that if the arbitrators are directed to apply the law and fail to do so they exceed their powers. The claim is not persuasive. It confuses the mode of decision with its finality. (Pacific Gas & Electric Co. v. Superior Court, supra, at p. 587.)

The court quoted Moncharsh: It is well settled that arbitrators do not exceed their powers merely because they assign an erroneous reason for their decision. [Citations.] A contrary holding would permit the exception to swallow the rule of limited judicial review . . . . (Moncharsh [v. Heily & Blase], supra, 3 Cal.4th at p. 28.) (Pacific Gas & Electric Co. v. Superior Court, supra, 15 Cal.App.4th at p. 588.)

The court also held that [t]he submission of a dispute to arbitration as an alternative to judicial adjudication is a matter of contract. [Citation.] If parties contract to submit an issue of law to binding arbitration they may not as a matter of course reopen a final resolution of the issue on the ground the arbitrators exceeded their powers. A principal reason for selecting arbitration is that the cost of the judicial forum is not worth the additional assurance it may afford of the correct result. That purpose, which the law favors, is disserved if review of questions of law decided in arbitration is freely available. The parties to a contract may draft an arbitration provision so as to afford judicial review of questions of law. The question here is what, if any, judicial review should be afforded where they have not done so. This is a question of the contract term to be supplied by law. [Citation.] In this case the parties expressed the intent that the arbitration award is binding. Regardless of such a provision, it is commonly expected, in the absence of a contrary provision, that the arbitrators decision will be final. [Citation.] (Pacific Gas & Electric Co. v. Superior Court, supra, 15 Cal.App.4th at pp. 588-589, fn. omitted.)

The parties here clearly intended to submit their disputes to binding arbitration. Even if the arbitrators interpretation of the attorney fee provisions is legally wrong, it did not exceed the powers of the arbitrator, and is therefore not legally reviewable by the courts.

The same is true of defendants statute of limitations and unclean hands arguments. The first argument is essentially a legal one. The second argument is essentially a factual one. The arbitrator considered each of these arguments and decided the issues. We should not, and cannot, review the factual or legal correctness of the arbitrators decision under these circumstances.

We therefore conclude that the trial court correctly analyzed the issues and properly found that defendants had not shown any reason not to confirm the arbitrators award under section 1286.2. The petition to confirm was properly granted and judgment was properly entered in conformance with the award. ( 1287.4.)

V. DEFENDANTS REQUEST FOR JUDICIAL NOTICE

On December 20, 2006, defendants requested that we take judicial notice of five volumes of documents from the arbitration proceeding. By order filed January 8, 2007, ruling on the request was reserved for consideration with the appeal.

The request states that judicial notice is requested in order to present a complete background of the facts before the Arbitrator. [] For example, some of these documents were referred to in the Arbitrators Award that was confirmed by the Superior Court. In order to flesh out a better understanding of the underlying facts, we are asking the Court to take judicial notice of those documents.

Since we have found that factual or legal review of the arbitrators decision is precluded, the underlying facts of the case are essentially irrelevant. The facts stated are taken primarily from the arbitrators award and memoranda of decision. As the parties recognize, courts may not review for sufficiency the evidence supporting an arbitrators award. [Citation.] We therefore take the arbitrators findings as correct without examining a record of the arbitration hearings themselves; indeed, the appellate record contains neither a reporters transcript of the hearings nor the exhibits introduced therein. (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 367, fn. 1.) The supporting documents are unnecessary to our decision and the request for judicial notice is therefore denied.

VI. DISPOSITION

The judgment is affirmed. If respondents wish to recover their attorney fees and costs on appeal they may do so by submitting a noticed motion to the trial court for determination of the amount of such fees and costs.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

/s/ King

J.

We concur:

/s/ Ramirez

P.J.

/s/ Richli

J.

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^[1] All further statutory references are to the Code of Civil Procedure unless otherwise indicated.