Venturini v. Smith

Filed 4/24/07 Venturini v. Smith CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIFTH APPELLATE DISTRICT

APPEAL from a judgment of the Superior Court of Kings County. James LaPorte, Temporary Judge. (Pursuant to Cal. Const., art. VI,  21.)

Kahn, Soares & Conway, Richard C. Conway and Joshua J. Bettencourt for Defendant and Appellant.

Williams, Jordan & Brodersen and Steven R. Williams for Plaintiff and Respondent.

-ooOoo-

Daisy Smith appeals from the order confirming an arbitration award in favor of Terry Venturini and the resulting judgment. She argues we must reverse because she did not consent to be bound by the contract that contained the arbitration agreement. We disagree and affirm the judgment.

FACTUAL AND PROCEDURAL SUMMARY

Venturini and Smith cohabitated for approximately 10 years. During that time each party bought and sold real estate with the intent to make a profit. Venturini maintained that although the two acted in their individual names, they were a partnership. Smith contended their activities were entirely separate. In any event, the parties ended their personal and business relationships.

In addition to their business activities, Venturini apparently sold a vehicle to Smiths son, who failed to make the required payments. Smith eventually paid the outstanding balance due on the vehicle ($5,000) to Venturini.

The disagreement over the status of their business relationship led to the filing of a complaint by Venturini that contained two causes of action: one for breach of contract and the other for breach of fiduciary duty. The essence of the complaint was that Smith retained title to one parcel of property in which Venturini held an interest, and Smith refused to share the proceeds from the property. Smith filed an answer that denied that Venturini held any interest in the property and asserted various affirmative defenses. Smith did not file a cross-complaint against Venturini, nor does her answer refer to the vehicle.

The matter was mediated before the Honorable Howard R. Broadman (retired). At the mediation an agreement was reached to settle the dispute. The agreement required Smith to pay Venturini $49,500. A printed form settlement agreement was prepared and signed by Venturini and his attorney to this effect. Venturini then returned to his home in Crescent City.

Smith did not sign the settlement agreement immediately, instead saying she wanted to think about the matter over lunch. When she returned from lunch, Smith revised the settlement agreement in several particulars. The only provision pertinent to this appeal is one that required Venturini to provide Smith with the certificate of title to the vehicle forthwith.^[1] According to Venturini, the issue regarding title to the vehicle had not been raised at any time during the mediation until Smith added the proposal to the settlement agreement. Smith has not provided any evidence to dispute this contention. Nonetheless, Smith and her attorney signed the settlement agreement as amended.

When Venturinis attorney received the revised settlement agreement, he contacted Venturini and discussed the proposed changes. In this conversation, Venturini informed his attorney that he believed he was only a lienholder on the vehicle and, as such, could not sign over legal title to Smith.^[2]

Venturinis attorney then contacted Smiths attorney and informed him that Venturini did not believe he had legal title to the vehicle, but he would transfer to Smith whatever interest he had in the vehicle on the condition that Smith obtain and prepare the necessary paperwork. Smith did not dispute that this conversation occurred or claim the conversation differed in some manner from that asserted by Venturinis attorney.^[3]Consistent with Venturinis evidence, another provision was added to the settlement agreement that stated, Terry [Venturini] will sign off on documentation provided by Daisy [Smith].

Both parties apparently relied on the settlement agreement in its final form. One week after the settlement agreement was signed, Smiths attorney forwarded to Venturinis attorney a letter requesting the actual certificate of title to the vehicle showing Smiths son as registered owner and Mr. Venturini as lienholder, and have him sign off on the line provided to release his lien. Only if Mr. Venturini has lost the Title Certificate, we request that he execute the Lien Satisfied/Title Holder Release enclosed herewith and have his signature notarized to allow issuance of a new Title Certificate. A Department of Motor Vehicles (DMV) form entitled LIEN SATISFIED/TITLE HOLDER RELEASE was enclosed with the letter. Approximately two months later, the signed Lien Satisfied/Title Holder Release was returned to Smiths attorney.

Smiths attorney then sent a letter to Venturinis attorney stating, in part, As Mr. Venturini was unable to provide the Title Certificate assigning his lien on said [vehicle] to Ms. Smith, we are enclosing herewith an Application for transfer of Title With Duplicate Title for Mr. Venturinis signature. Please have Mr. Venturini sign at item 3 as the lien holder requesting that the lost Title be reissued, and at item 5 transferring his lien interest to Ms. Smith. Also please note that Mr. Venturinis signature at item 5 must be notarized. [] Once we have received said fully executed Application and the Duplicate Title, Mr. Venturini will have fulfilled the conditions stated in the parties[] Settlement Agreement, and Ms. Smith will deliver payment in full under said Agreement. A DMV form application entitled TRANSFER OF TITLE WITH DUPLICATE TITLE was enclosed with the letter.

Approximately three weeks later, Venturinis attorney sent Smiths attorney a letter stating the DMV application was fully executed and notarized, and it would be turned over to Smith once Smith made the $49,500 payment due pursuant to the terms of the settlement agreement. This letter was met with silence.

Approximately one month later, Venturini filed a motion for entry of judgment pursuant to the terms of the settlement agreement. (Code Civ. Proc.,  664.6.)^[4]Smith opposed the motion, arguing there was no mutual consent to the settlement agreement because she thought that Venturini was the legal owner of the vehicle, and she expected him to turn legal title over to her. Smith argued that she would not have agreed to pay Venturini $49,500 if she had known that he did not have legal title to the vehicle. Therefore, Smith argued, there was no meeting of the minds and no contract was formed.

The settlement agreement contained a provision that required any dispute to be arbitrated before Judge Broadman. The trial court ordered the matter to arbitration pursuant to that provision.

Judge Broadman found no merit to Smiths arguments and awarded Venturini the $49,500 agreed to in the settlement agreement. Venturini apparently delivered the executed DMV paperwork to Smith at the arbitration.

Venturini filed a petition to confirm the arbitration award. Smith objected to the petition and sought a trial de novo. The grounds for seeking a new trial were essentially identical to those asserted in opposition to the motion for entry of judgment. The trial court affirmed the award and entered judgment accordingly.

DISCUSSION

Smith argues the trial court should not have confirmed the arbitration award because the settlement agreement was not a valid contract. We reject this argument because Smith cannot overcome the limited review available from an arbitration award.

Section 1286.2 limits a courts ability to vacate an arbitration award by listing specific grounds that must exist before the court may act.^[5] These grounds include fraud in the procurement of the award, arbitrator misconduct or corruption, or an arbitrator acting in excess of his or her powers. Numerous cases have confirmed that a courts ability to act is limited to the grounds listed in the statute. (See, e.g., Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 55; Trabuco Highlands Community Assn. v. Head (2002) 96 Cal.App.4th 1183, 1188-1189.) These limitations are consistent with the recognition that a court may not review an arbitrators decision for errors of law or fact. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11 (Moncharsh).)

Smith presents two theories to support her claims. First, she contends the arbitration award violates public policy. While a violation of public policy is not one of the grounds listed in section 1286.2, Moncharsh recognized that an arbitration award may be reversed if enforcement of the award would violate a statute and violate clearly established public policy. (Moncharsh, supra, 3 Cal.4th at p. 32.) Moncharsh referred to two cases in discussing this topic.

The first was Loving & Evans v. Blick (1949) 33 Cal.2d 603 (Loving & Evans). Loving and Evans, a partnership,performed construction work for Blick pursuant to a contract that included an arbitration clause. Blick disputed the amount the partnership claimed was due for the work performed. The matter was submitted to arbitration and an award was entered in favor of the partnership. Blick opposed the petition to confirm the arbitration award, asserting that the partnership was not licensed properly as a contractor as required by the Business and Professions Code. (Bus. & Prof. Code,  7028, subd. (a) &7031, subd. (a).) The trial court confirmed the award.

The Supreme Court first determined the contract was illegal and void because of the failure of the partnership to obtain a contractors license. [A] contract made contrary to the terms of a law designed for the protection of the public and prescribing a penalty for the violation thereof is illegal and void, and no action may be brought to enforce such contract [citations]; and that whenever the illegality appears, whether the evidence comes from one side or the other, the disclosure is fatal to the case. [Citations.] (Loving & Evans, supra, 33 Cal.2d at pp. 607-608.) The Supreme Court next concluded the issue could be raised in the trial court in opposition to a petition to affirm an arbitration award. It must be conceded at the outset that ordinarily with respect to arbitration proceedings the merits of the controversy between the parties are not subject to judicial review [citation] and that arbitrators are not bound by strict adherence to legal procedure and to the rules on the admission of evidence expected in judicial trials. [Citation.] But, as will hereinafter appear, the rules which give finality to the arbitrators determination of ordinary questions of fact or of law are inapplicable where the issue of illegality of the entire transaction is raised in a proceeding for the enforcement of the arbitrators award. When so raised, the issue is one for judicial determination upon the evidence presented to the trial court, and any preliminary determination of legality by the arbitrator, whether in the nature of a determination of a pure question of law or a mixed question of fact and law, should not be held to be binding upon the trial court. (Id. at p. 609.)

The same issue was addressed in All Points Traders, Inc. v. Barrington Associates (1989) 211 Cal.App.3d 723 (All Points Traders), the second case cited in Moncharsh. The dispute involved the payment of a commission as the result of the sale of a business. The primary issue was whether Barrington Associates, an investment banking firm, was required to have a real estate brokers license for its activities in this transaction. The appellate court concluded one was needed and proceeded to the issue of the arbitration award. Relying on Loving & Evans, the appellate court concluded the arbitration award should be vacated.

Inherent in the arbitration award granting Barrington a commission for its involvement in the sale of All Points is the finding that the underlying contract was legal and enforceable. However, the issue of illegality is one for judicial determination upon the evidence presented to the trial court, and the arbitrators finding, whether in the nature of a determination of a pure question of law or a mixed question of fact and law, is not binding on the trial court. [Citation.] [] [] 

We recognize and acknowledge that there may be special circumstances where the purpose of the legal requirement would not be advanced by denying relief. [R]ules denying relief to parties to illegal contracts are subject to a wide range of exceptions. In each case, the grant or refusal of relief depends upon the public interest involved in the particular kind of illegality, including the policy of the transgressed law. [Citation.] In each such case, how the aims of policy can best be achieved depends on the kind of illegality and the particular facts involved. [Citation.] [Citation.]

This is not such a case. Enforcement of the contract for a commission would be in direct contravention of the statute and against public policy.

The Legislature selected the specific means to protect the public and has expressed its intention in [Business and Professions Code] section 10136 which states, No person engaged in the business or acting in the capacity of a real estate broker or a real estate salesman within this State shall bring or maintain any action in the courts of this State for the collection of compensation for the performance of any of the acts mentioned in this article without alleging and proving that he was a duly licensed real estate broker or real estate salesman at the time the alleged cause of action arose. In light of the statutes mandatory dictation, we must conclude that Barrington cannot pursue its action for a commission.(All Points Traders, supra, 211 Cal.App.3d at pp. 737-738.)

Smith has cited another case, City of Palo Alto v. Service Employees Internat. Union(1999) 77 Cal.App.4th 327 (City of Palo Alto). Danton Camm was employed in a supervisory position by the City of Palo Alto (City), and was a member of the Service Employees International Union (Union). Camm apparently had a history of threatening to harm his coworkers as a motivational tool. He also had a well-known interest in hunting, and owned numerous rifles and pistols.

One day Camm threatened to kill Brian Bingham, another city employee, as well as Binghams wife and child. Bingham complained to his supervisor, resulting in Camms termination. Camm maintained he was not serious, but was trying to improve Binghams otherwise substandard performance. Criminal charges were brought, with Camm pleading to a misdemeanor. The City obtained an injunction precluding Camm from having any contact with Bingham, including a provision requiring Camm to stay at least 100 yards away from Bingham, his wife, his child, and from some of the Citys facilities.

The Union argued Camms dismissal failed to follow the requirements of the contract between the Union and the City. The matter was referred to arbitration where the Union prevailed. The City petitioned to vacate the arbitration award.

The appellate court began its analysis by recognizing its limited role in reviewing arbitration awards. The normal rule of limited judicial review cannot be avoided except in those rare cases where according finality to the arbitrators decision would be incompatible with the protection of a statutory right or where the award contravenes an explicit legislative expression of public policy. [Citations.] Absent a clear expression of illegality or public policy undermining this strong presumption in favor of private arbitration, an arbitral award should ordinarily stand immune from judicial scrutiny. [Citation.] (City of Palo Alto, supra, 77 Cal.App.4th at p. 334.) The appellate court next rejected the Citys contention that reinstating Camm violated the public policy requiring employers to provide a safe workplace for its employees as an issue of fact the arbitrator had resolved against the City, and which the appellate court could not revisit. (Id. at p. 338.)

The appellate court found, however, that the arbitrators award would result in a violation of the injunction, resulting in a violation of the public policy requiring obedience to judicial orders. We see no way that the arbitrators award reinstating Camm could have been put into operation without Camm disobeying the injunction. Thus, the arbitration award of unconditional reinstatement was irreconcilable with the public policy requiring obedience to court orders, especially an injunction issued pursuant to Code of Civil Procedure section 527.8. The conflict was all the more profound since the injunction was based upon a judicial finding by clear and convincing evidence that Camm had made a credible threat of violence against Bingham. [Citation.] (City of Palo Alto, supra, 77 Cal.App.4th at pp. 339-340, fn. omitted.)

As these cases establish, there is a limited exception for vacating an arbitration award: when enforcing the award would violate a public policy. To invoke this exception, however, Smith must prove that the enforcement of the arbitrators award violates either a statutory right or a public policy clearly expressed by the Legislature. This is not one of those rare cases.

In an attempt to meet this requirement, Smith argues that no contract was formed because there never was a meeting of the minds. Specifically, she asserts that her consent to the settlement agreement was dependent on Venturini agreeing to provide her with a valid certificate of title to the vehicle. Venturini then changed this obligation by inserting the provision that merely required him to sign whatever documentation was presented to him by Smith to transfer his interest in the vehicle to her.

Smith argues the lack of mutual consent to the contract implicates the clearly established public policy found in Civil Code sections 1550, 1565, and 1580. These statutes list the elements essential to the existence of a contract (capacity, consent, a lawful object, consideration) (Civ. Code,  1550); that consent must be free, mutual, and communicated to the other party (Civ. Code,  1565); and that consent is not mutual unless all parties agree on the same thing in the same sense. (Civ. Code,  1580.)

We reject Smiths argument for three reasons. First, while mutual consent is an element to a valid contract, this argument does not implicate a public policy or statutory right to which this limited exception would apply.

The cases reviewed above all involve a clear mandate from the Legislature designed to protect the public. Loving & Evans involved Business and Professions Code section 7031, subd. (a), which prohibits an action to recover for contracting services by an unlicensed contractor. In a similar vein, All Points Traders involved Business and Professions Code section 10136, which prohibits an action to recover commissions for a transaction in which a real estate brokers license is required. These two statutes are intended to protect the public, the public policy that justified vacating the arbitrators decision.

In City of Palo Alto, the award was vacated because it was impossible to enforce the award without violating a court order, an injunction issued to protect Bingham and his family, a result the appellate court properly found untenable.

The statutes relied on by Smith, on the other hand, set forth substantive provisions of law to guide courts and the public in issues involving contracts. These statutes are not intended to establish some overriding public policy, but are intended to provide guidance to those who are contemplating entering into a contract, or are involved in a contractual relationship. When there is a dispute involving a contract, these statutes can be used as a guide to resolve the dispute. These statutes are not a statement of public policy that will permit this court to review the arbitration award for any possible errors.

Second, the arbitrator did not ignore the requirements of Civil Code sections 1550, 1565, and 1580; he merely resolved the issue adversely to Smith. Despite her protestations to the contrary, Smiths argument is that the arbitrator erred in concluding the settlement agreement was a binding contract. Even if we agreed with Smith, an issue we do not resolve, neither we nor the trial court are permitted to correct errors of fact or law.

Third, there is substantial evidence in the record to support the arbitrators conclusion that there was mutual consent to the settlement agreement. Venturinis attorney explained to Smiths attorney that he did not have the certificate of title to the car and, in any event, had only a security interest in the vehicle. Smiths attorney then consented to the language that was inserted into the settlement agreement by Venturinis attorney. Smiths attorneys consent is evidenced by the actions he took in obtaining various DMV forms and requesting they be executed by Venturini. Smiths attorney was her agent, and she was bound by his actions. (CPI Builders, Inc. v. Impco Technologies, Inc. (2001) 94 Cal.App.4th 1167, 1174.)

Finally, Smith complains the arbitration award cannot be enforced because it was obtained by fraud, one of the grounds listed in section 1286.2, subdivision (a)(1).) The cases cited by Smith explain that an arbitration award may be vacated or corrected if one of the parties was denied a fair opportunity to participate in the hearing, or if false evidence was presented at the arbitration hearing. (Pour Le Bebe, Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810, 827-830.) Some courts have imposed a three-part test to determine if the claimed fraud justifies judicial intervention. First, the movant must establish the fraud by clear and convincing evidence. [Citations.] Second, the fraud must not have been discoverable upon the exercise of due diligence prior to or during the arbitration. [Citations.] Third, the person seeking to vacate the award must demonstrate that the fraud materially related to an issue in the arbitration. [Citations.] [Citations.] (Id. at p. 830.)

Smith bases her assertion of fraud on a statement contained in a declaration signed by Venturini that was submitted in support of his motion for judgment. Venturini stated in his declaration, Pursuant to the terms of the mediation Settlement Agreement [Smith] was to provide me with the documentation to sign to clear title to the [vehicle] which I had signed off on several years earlier but for which I was apparently still listed as a lien holder. Smith argues this statement was false because Venturini remained the legal owner of the vehicle at the time of the arbitration hearing.

There are numerous reasons why this argument lacks merit. First, Smith did not establish by clear and convincing evidence that Venturini was the legal owner of the vehicle. Her evidence consisted of a document from the DMV that lists her son as the R/O of the vehicle, and Venturini as the L/O. It is unclear what these abbreviations mean, and Smith failed to authenticate the DMV document properly. Moreover, there is no evidence that Venturinis statement was intentionally false. The distinction Smith attempts to draw (legal owner instead of lienholder) could well be the result of an inadvertent error.^[6]

Second, if Venturinis statement was false, it was easily discoverable by Smith before the arbitration hearing. She relies on a declaration executed and served on her counsel over one year before the arbitration hearing. Smith could have discovered the falsity of the statement, if it was false, through the exercise of due diligence.

Third, Smith fails to explain, and we cannot discern, why Venturinis status as the legal owner of the vehicle was material to any issue in the arbitration. Venturini agreed to transfer whatever ownership interest he had in the vehicle to Smith. He signed the documents prepared by Smiths counsel to transfer his ownership interest. He apparently met all his obligations.

Smith claimed she was being charged storage fees from a repair shop where the vehicle was located because she could not get possession since Venturini was the legal owner. This problem was not part of the agreement. In any event, she did not explain why the documents already signed by Venturini would not have been sufficient to obtain possession or why her son, the purported registered owner, could not get possession. She also could have prepared a simple permission slip allowing her to take possession of the vehicle and presented it to Venturini for his signature, but she did not.

Smiths inability to prove any of the above three elements would prevent vacation of the arbitration award. Her inability to prove even one of the elements fully demonstrates the frivolous nature of this argument Frankly, this entire course of conduct by Smith appears designed to avoid paying the $49,500 she agreed to pay Venturini.

DISPOSITION

The order confirming the arbitration award and the judgment entered thereon are affirmed. Costs are awarded to Venturini.

_____________________

CORNELL, Acting P.J.

WE CONCUR:

_____________________

DAWSON, J.

_____________________

HILL, J.

Publication Courtesy of California attorney referral.

Analysis and review provided by Vista Property line attorney.

^[1] This provision reads Daisy [Smith] signs on condition that Terry [Venturini] return the pink slip for the [vehicle] forthwith.

^[2] Venturini also approved some of the changes requested by Smith and added others. None of these matters is relevant to the issues on appeal.

^[3] Smiths attorney at the time the settlement agreement was negotiated submitted a declaration in support of Smith. This declaration states that Smith signed the settlement agreement with the provision that required Venturini to return the certificate of title to the vehicle and that after Smith signed the agreement, Venturinis attorney added the provision that Venturini would sign whatever paperwork was provided by Smith. Smiths attorney then says that Smith did not agree to the added clause, and that neither Smith nor her attorney initialed the clause. Omitted from the declaration is a claim that Smiths attorney did not agree to the added clause, thus confirming the sequence of events set forth by Venturini.

^[4] All further statutory references are to the Code of Civil Procedure unless otherwise noted.

^[5] Section 1286.2 states in full:

(a) Subject to Section 1286.4, the court shall vacate the award if the court determines any of the following:  
(1) The award was procured by corruption, fraud or other undue means.
(2) There was corruption in any of the arbitrators.
(3) The rights of the party were substantially prejudiced by misconduct of a neutral arbitrator.
(4) The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.
(5) The rights of the party were substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefor or by the refusal of the arbitrators to hear evidence material to the controversy or by other conduct of the arbitrators contrary to the provisions of this title.
(6) An arbitrator making the award either: (A) failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware; or (B) was subject to disqualification upon grounds specified in Section 1281.91 but failed upon receipt of timely demand to disqualify himself or herself as required by that provision. However, this subdivision does not apply to arbitration proceedings conducted under a collective bargaining agreement between employers and employees or between their respective representatives.
(b) Petitions to vacate an arbitration award pursuant to Section 1285 are subject to the provisions of Section 128.7.

^[6] This is especially true here since it appears the entire confusion that caused this dispute comes from not understanding the requirements of the Vehicle Code concerning perfection of a lien on a motor vehicle. Vehicle Code section 6300 et seq. clearly specifies that the only method available to perfect a lien on a motor vehicle is to become the legal owner.