Pyles v. American Arbitration Assn.

Filed 7/19/07 Pyles v. American Arbitration Assn. 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

APPEALS from the Superior Court of Riverside County. Gloria Connor Trask, Judge; Patricia Rich and Joan F. Burgess, Temporary Judges. Affirmed as modified.

Patrick Pyles, in pro. per.; and Diana Renteria, for Appellant.

Irsfeld, Irsfeld & Younger, C. Phillip Jackson, and Kathryn Van Houten for Respondents American Arbitration Association and Edward J. Costello, Jr. in No. E039941.

Richard S. Price for Respondent Shook Building Systems, Inc. in No. E040730.

In this consolidated appeal, Patrick Pyles (Pyles) challenges an order and a judgment entered in two separate but related actions. Both of those actions arise out of a subcontract agreement whereby Pyles agreed to perform lath and plaster work on a construction project for which Shook Building Systems, Inc. (Shook) was general contractor.^[1] In case No. E039941, Pyles contests an order of dismissal entered after the trial court sustained, without leave to amend, demurrers of American Arbitration Association (AAA) and its assigned arbitrator, Edward J. Costello, Jr. (Costello), to Pyless complaint seeking to enjoin AAA and Costello from proceeding with arbitration of his dispute with Shooka dispute which Pyles insists was not subject to arbitration. In case No. E040730, Pyles challenges a judgment confirming the award entered in Shooks favor after arbitration was allowed to proceed, again contending there never was a contract to arbitrate the underlying dispute.

The dispositive issue in both appeals is whether Pyles, as an individual doing business as Sterling Plastering Company, entered into a valid enforceable subcontract agreement with Shook providing for arbitration of any claim or controversy arising therefrom. We conclude that there was an enforceable contract, that the arbitration was properly conducted, that judgment was lawfully entered, and that Pyless various arguments to the contrary are meritless.

FACTUAL AND PROCEDURAL BACKGROUND

On the face of the agreement, which bears the date April 20, 2004, the parties are designated as Shook Building Systems, Inc., and Sterling Plastering, Inc. On June 21, 2004, Pyles signed his name on the line designated Authorized Signature, beneath the name Sterling Plastering, Inc. In so doing, Pyles placed a diagonal line through Inc., and in its place wrote Com, followed by his initials. On June 25, 2004, the agreement was signed on Shooks behalf by Bill Wilhite, Vice President.

The agreement contained an arbitration clause providing that [a]ny controversy or claim arising out of [the] contract or the breach thereof shall be settled by arbitration in accordance with Construction Industry Arbitration Rules of the American Arbitration Association, and judgment upon the award of the arbitrator may be entered in any court having jurisdiction thereof.

Performance under the agreement commenced in November 2004, after which the parties became embroiled in a dispute, the nature of which is not relevant here.

On April 27, 2005, Shook, as claimant, filed and served upon Pyles a demand for arbitration with AAA. The demand designated Sterling Plastering, Inc., as Respondent, and Patrick Pyles as Representative. A hearing was scheduled for September 27, 2005.

On September 19, 2005, in an effort to halt the upcoming arbitration, Pyles filed an action against AAA, Costello, and Richard Price, counsel for Shook (the injunction action).^[2] Pyles also applied ex parte for a temporary restraining order, claiming that Sterling Plastering, Inc., could not be a party to the subcontract agreement because it was not in existence at the time the agreement was executed. On September 22, 2005, the application was denied.

By motion dated September 23, 2005, Shook asked the arbitrator to amend its claim to name Patrick Pyles dba Sterling Plastering Co. as respondent. Shook alleged that good cause exists to amend its claim to accurately reflect the name of the contracting party. According to Shook, such an amendment was permitted under AAAs Construction Industry Arbitration Rules.

The arbitration took place on November 1, 2005. According to the Final Award of Arbitrator issued on November 10, 2005, Pyles objected to the arbitration proceeding [going] forward, arguing that there was no enforceable Arbitration Agreement. That motion was denied. After being advised that the hearing would proceed in his absence, Patrick Pyles left the hearing. The hearing proceeded and Shooks Motion to Amend the Claim to add Patrick Pyles dba Sterling Plastering Co.^[3] as a Respondent was granted. Declarations and documents previously filed and served were admitted into evidence. Finally, an award was issued in favor of Shook and against Sterling Plastering, Inc. and Patrick Pyles, dba Sterling Plastering, Inc. in the sum of $51,486.14.

On November 18, 2005, Shook filed a petition to confirm the arbitration award, and a hearing was scheduled for January 18, 2006. Pyles filed opposition to the petition, contending once again that [n]o contract existed or has ever existed between Shook and Patrick Pyles or Sterling Plastering, Inc. He argued that Sterling Plastering, Inc. has never been a dba of Patrick Pyles, and that the claimed subcontract agreement is actually a counteroffer which he made but was never accepted by Shook. He further argued that the arbitration claim was filed against Sterling Plastering, Inc., not Patrick Pyles doing business as Sterling Plastering, Inc. He asserted that Sterling Plastering, Inc., stopped its operations on December 31, 2003, and began as a new corporation on May 2, 2005.

Also on November 18, 2005, in the injunction action, a demurrer was filed on Costellos behalf.^[4] According to that demurrer, Costello and AAA were immune from suit based upon the California common law rule of immunity of arbitrators, and the complaint therefore fails to state facts sufficient to constitute a cause of action against [them]. Pyles filed opposition, contending, in essence, there could be no arbitral immunity because there was no agreement to arbitrate. In reply, AAA and Costello asserted that, notwithstanding the existence of an agreement to arbitrate, Pyless only remedy was to move to vacate the arbitration award under Code of Civil Procedure section 1286.2 on the ground the arbitrator exceeded his power.

On January 4, 2006, Pyles filed a motion to consolidate the two matters. He argued that consolidation . . . is proper and will insure the orderly adjudication of the

issues and the conservation of judicial assets and judicial economy. Shook opposed the motion on procedural grounds and also argued there was essentially nothing to consolidate because arbitration had already been concluded and a trial would not be needed in connection with the petition to confirm the arbitration award, which was all that remained. At a hearing on February 6, 2006, the court denied the motion.^[5]

Meanwhile, a hearing on the demurrers was held on January 31, 2006. After considering the supporting and opposing papers, and hearing argument on the parties behalf, the court sustained the demurrers without leave to amend. On February 8, 2006, Pyles filed a notice of appeal^[6] from the [j]udgment of dismissal after an order sustaining a demurrer.

On April 4, 2006, the court heard Shooks petition to confirm the arbitration award. During the course of the hearing, the court and Pyles engaged in the following colloquy, whereby Pyles was permitted to explain his position that no agreement to arbitrate was ever made:

THE COURT: [] I spent a lot of time on this one, too. It keeps coming back. But the basic law is the award of arbitrator is presumed valid, so it would be Mr. Pyles who has the burden of proof to establish some grounds. And we turn to CCP Section 1286, which sets forth the statutory grounds. [] Theres nothing that I see that deals with corruption, fraud, or undue means, or corruption or misconduct by the arbitrator. I think the closest thing that youre arguing is that the arbitrator exceeded his power in proceeding with the arbitration award. Im not finding that. [] I go back to the original contract. The original contract has a very broad arbitration clause because it allows any controversy or claim arising out of the contract for the breach to be decided by the arbitrator. [] And then I go to where it was signed. And I think youre trying to argue that it was a counteroffer?

MR. PYLES: Absolutely, your Honor.

THE COURT: But what -- and, again, Im just looking at this. But you signed it on June 21st, 2004. They signed it on June 25th, 2004. So they signed it 4 days after you signed it. [] But as far as I can tell, it looked like both -- that you initialed where the [Inc.] was crossed off, because Im seeing a PRP.

MR. PYLES: It was a counteroffer, your Honor. But Sterling Plastering, Inc., did not exist at the time that the contract was issued. Shook Building Systems knew that when they issued me the contract. Thats my argument, your Honor.

THE COURT: But you signed -- you signed it, and then they signed it afterwards. So you -- I mean --

MR. PYLES: How could I sign something that doesnt exist? It was an offer to them to send me a contract under Sterling Plastering Company, your Honor.

THE COURT: I dont see that. When you cross off the --

MR. PYLES: Of course you dont see it. But Im just -- my argument is that --

THE COURT: I know.

MR. PYLES: -- Sterling Plastering, Inc., didnt exist. He knew that when he sent me the contract. Hes the one that made me aware of that. So after he had made me aware of that, they had sent the contract already, and my secretary had asked numerous times for them to send me a contract under Sterling Plastering Company.

THE COURT: But my understanding is, after this was signed, you acted in ways consistent with there being a contract. You did some work, and they had a problem with what was done, and they hired someone else afterwards.

MR. PYLES: Thats because I couldnt get my contract, your Honor. They would not send me a valid contract. [] Now, if you put the shoe on the other foot, how about if I did the work and they didnt pay me? See, I would have the law to come back after them to get my money.

THE COURT: Well, I disagree. If you did the work and they didnt pay, I would be holding this to be a contract, not a counteroffer --

MR. PYLES: Okay.

THE COURT: -- that never got accepted.

MR. PYLES: Thats fine, your Honor.

THE COURT: You know, I look at it. You signed it, and I can only assume that you initialed it on the date you signed it, and you initialed where the [Inc.] was crossed out. They signed it afterwards. And then you went and you performed. And the question is over what was done. [] Now, the claim that the arbitrator to the extent youre saying the arbitrator exceeded his or her powers, it has to be based upon the fact that youre saying the arbitrator didnt have the right to determine whether or not this was a valid contract. But Im not finding any case law that really supports that theory. Im not finding any case law that supports your theory that its a counteroffer, not a valid contract. And, unfortunately for you, I believe the arbitration award has to be confirmed.

The court therefore granted the motion, and on April 11, 2006, judgment was entered against Patrick Pyles dba Sterling Plastering, Inc., in the total amount of $54,852.14, including attorneys fees and costs of $3,366.

On June 5, 2006, Pyles filed a notice of appeal from that judgment.^[7]

DISCUSSION

Pyles does not dispute the fact that he himself signed the agreement after making a changeand initialing the changeto reflect that he was signing on behalf of his company, i.e., Sterling Plastering Co., rather than the defunct Sterling Plastering, Inc. Nor does he deny that the agreement was signed on Shooks behalf four days after he affixed his signature to the document, or that he began to perform under the agreement several months after it was fully executed. Rather, he contends that the agreement he signed on June 21, 2004, is a nullity in that Sterling Plastering, Inc., the corporation whose name appears on the agreement, was not in existence on the day the agreement was signed, and because the agreement to arbitrate is therefore also a nullity, the arbitration award and the judgment confirming that award must be vacated. His position is meritless.

Under basic principles of contract law, a contract is formed where the parties mutually assent to the agreed upon terms. (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 141.) Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings. [Citation.] Mutual assent is a question of fact. [Citation.] (Ibid.) In order to manifest mutual assent, the acceptance must ordinarily be expressed or communicated by the offeree to the offeror. (Civ. Code, 1556, 1581.) Once a valid offer is accepted, the parties are bound.

Here, of course, Pyles contends there was no contract and therefore no right to arbitrate. He is correct that [t]he right to arbitrate is grounded in contract. [Citation.] (Fontana Teachers Assn. v. Fontana Unified School Dist. (1988) 201 Cal.App.3d 1517, 1521.) However, the record belies his position.

Pyles executed the subcontract agreement, clearly indicating that he was doing so on behalf of Sterling Plastering Co. Contrary to Pyles assertion, his action in removing the Inc. and initially the change did not constitute a counteroffer, i.e, an offer which an offeree presents to the offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer. (Rest., Contracts, 39(1).) In no manner did Pyles modify the terms of the contract, nor did he propose a substituted bargain. Rather, he merely made a correction to reflect that he was signing the document on behalf of Sterling Plastering Co. rather than its predecessor corporation. Moreover, the contract was signed on Shooks behalf after it was signed by Pyles, and Pyles, without objection, commenced performance. Citing Civil Code section 1558, which provides, It is essential to the validity of a contract, not only that the parties should exist, but that it should be possible to identify them, Pyles contends there was no clear understanding of who the parties to the contract agreement were and if they existed. Not so. In communicating with Shook after the agreement was signed, Pyles used Sterling Plastering Co. letterhead. Clearly, the parties had to have known precisely who they were each dealing with.

Finally, as the trial court aptly noted, it was Pyles burden to establish a statutory basis precluding confirmation of the arbitration award, such as corruption or fraud in procuring the award; corruption or misconduct by the arbitrator; or that the arbitrator had exceeded his or her powers. (Code Civ. Proc., 1286.2.) The court recognized that the closest thing that [Pyles was] arguing is that the arbitrator exceeded his power in proceeding with the arbitration award. Im not finding that. We agree. Indeed, because the court correctly found that there was an agreement to arbitrate, any claim Pyles may have had to the effect the arbitrator exceeded his powers went by the wayside.

Because we conclude that a valid enforceable agreement was made between the parties, we do not reach Pyless contention that, because there was no agreement, the demurrers of AAA and Costello were wrongly sustained in that arbitral immunity is unavailable in the absence of an agreement to arbitrate.^[8] Nor do we address Pyless contention the judgment cannot stand because it confirms an award against an unknown new entity Patrick Pyles dba Sterling Plastering Inc. Suffice it to say, to subscribe to Pyless position would be to exalt form over substance and violate the maxim of jurisprudence set forth in Civil Code section 3528: The law respects form less than substance. Clearly, the substance of Pyles transaction with Shook is the focus and not the form. In that regard, we shall direct the trial court to modify the judgment entered on April 11, 2006, so as to correct the clerical error made by the court in confirming the arbitrators award, which itself was a result of a clerical error in the arbitrators award. (See 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, 748, p. 777.)

DISPOSITION

The order of dismissal entered March 22, 2006, is affirmed. With respect to the judgment entered April 11, 2006, the trial court is directed to modify the judgment, nunc pro tunc, to provide that judgment was entered in favor of Shook Buildings Systems, Inc.,

and against Patrick Pyles doing business as Sterling Plastering Co. As modified, the judgment is affirmed. Respondents are entitled to costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

/s/ MILLER

J.

We concur:

/s/ RAMIREZ

P. J.

/s/ McKINSTER

J.

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^[1] At AAAs request, and over Pyles objection, we have ordered the appeals consolidated for purposes of oral argument and decision. In this regard, and as indicated later in this opinion, Pyles sought unsuccessfully to consolidate the two cases in the trial court. We therefore find it curious that Pyles opposed consolidation here.

^[2] The complaint is not included in the record. However, according to the demurrer later filed on Costellos behalf, it alleged that AAA and Costello are arbitrating a dispute, that Shook claim[s] to have an arbitration agreement, that there is no agreement, and that AAA, Costello, and Shooks lawyer have intentionally inflicted emotional distress upon [Pyles]. In other words, the gist of Pyless complaint was that the defendants were attempting to arbitrate a dispute, which [was] not subject to arbitration, and which [Pyles] has protested. Pyles was also seeking $15,000 in damages to compensate him for, among other things, harassment, oppression and emotional distress allegedly inflicted upon him by the defendants.

^[3] Although Shook asked that the name of the respondent be changed to Patrick Pyles dba Sterling Plastering Co., we note that the arbitrator inadvertently named Patrick Pyles and Patrick Pyles dba Sterling Plastering, Inc., as respondents. As a consequence, the judgment confirming the arbitration award also designated Sterling Plastering, Inc., as the party against whom judgment was rendered.

^[4] The record reflects that on October 31, 2005, AAA submitted its own demurrer, which was rejected in error and which we presume was properly filed after the error was discovered. The demurrer itself, however, is not included in the record.

^[5] In case number E040730, Pyles asserts, without providing any cognizable legal argument, that Commissioner Burgess, on February 6, 2006, denied his motion to consolidate notwithstanding the fact that Judge Pro Tem Rich, on January 9, 2006, continued the January 18, 2006, hearing on Shooks petition to confirm arbitration award to February 6, 2006, so that it could be heard in conjunction with Pyles motion to consolidate scheduled for hearing on that date. As it is impossible to discern what Pyles is complaining about, we deem that issue waived. (Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115.)

^[6] Pyless notice of appeal indicates he is appealing a [j]udgment of dismissal after an order sustaining a demurrer. The order of January 31, 2006, to which Pyles refers in the notice, is, in fact, the minute order sustaining the demurrer. And because a judgment of dismissal had not yet been entered, there was no appealable order, and on that basis AAA and Costello moved to dismiss the appeal. The motion was denied, however, because an order dismissing Pyless complaint had been filed in the interim; thus, the notice was deemed to be timely filed under California Rules of Court, rule 2(e).

^[7] Pyless notice of appeal erroneously states that he is appealing from a judgment entered on April 16, 2006. We have construed the notice in favor of its sufficiency as applying to the judgment entered on April 11, 2006. (Walker v. Los Angeles County Metropolitan Transportation Authority (2005) 35 Cal.4th 15, 20.)

^[8] We do, however, recognize there is authority for the proposition that an organization sponsoring an arbitration, together with the arbitrator, are protected from lawsuits such as this one even if they acted in the clear absence of jurisdiction. (See, e.g., Stasz v. Schwab (2004) 121 Cal.App.4th 420, 433, 436, 441-442).