American Builder's Assn. v. Au-Yang

• Decision Date: 13 December 1990
• Docket Number: AU-YAN,S
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN BUILDER'S ASSOCIATION, Plaintiff and Appellant, v. Williamabrina Au-Yang, Bonita Ace, Inc., Defendants and Respondents. Civ. B046838.

Page 262

276 Cal.Rptr. 262

226 Cal.App.3d 170

AMERICAN BUILDER'S ASSOCIATION, Plaintiff and Appellant, v. William AU-YANG, Sabrina Au-Yang, Bonita Ace, Inc., Defendants and Respondents.

Civ. B046838.

Court of Appeal, Second District, Division 3, California.

Dec. 13, 1990.

[226 Cal.App.3d 172] Geoffrey V. Morson, Los Angeles, for plaintiff and appellant.

Raimund Freihube, Pasadena, and Jeffrey J. Don, Los Angeles, for defendants and respondents.

KLEIN, Presiding Justice.

Plaintiff and appellant American Builder's Association (Builder's) appeals an order denying its application for a preliminary injunction for relief from arbitration. ¹

We consider whether an arbitrator exceeded his powers in ordering the joinder of a co-claimant which was not a signatory to a contract providing for arbitration.

We conclude the trial court erred in holding the arbitrator had jurisdiction to determine the nonsignatory's status. Whether the nonsignatory was an undisclosed principal so as to be properly joined in the arbitration was a question of fact for the trial court in the first instance. The order therefore is reversed and the matter is remanded.

FACTUAL AND PROCEDURAL BACKGROUND

On April 11, 1988, defendants and respondents William Au-Yang and Sabrina Au-Yang (the Au-Yangs) entered into a written construction contract with Builder's, a general contractor, for the renovation of a residence at 2900 Lakeridge Drive in North Hollywood for the sum of $145,000. The contract named the Au-Yangs as the owners of the property and contained a standard arbitration clause. ²

A dispute arose between the parties. On or about January 8, 1989, the Au-Yangs filed a demand for arbitration to institute proceedings before the American Arbitration Association (AAA). No answer or counterclaim was filed by Builder's. The proceedings commenced on July 10, 1989.

Based on the limited record before us, it appears evidence was introduced at the arbitration hearing that although the Au-Yangs were the signatories to the contract, all payments had been made by defendant and respondent Bonita Ace, Inc. (Bonita) except for the initial deposit. There was also evidence that Bonita held title to the property although the Au-Yangs were entitled to, and had possession of, the premises. The arbitrator made a factual finding the Au-Yangs had signed the contract as agents for Bonita. Therefore, the arbitrator determined the arbitration could not proceed without bringing in Bonita as a party, and ordered the Au-Yangs to join Bonita as a co-claimant in the proceeding.

The hearing was continued to September 12, 1989, and the Au-Yangs were given until August 15, 1989 to amend their demand for arbitration to include Bonita as a co-claimant. The arbitrator also set a deadline of August 25, 1989, for Builder's to file a response or counterclaim to the amended demand for arbitration. In addition, the arbitrator indicated he would consider continuing the proceedings if Builder's sought to conduct discovery on the newly joined party.

The Au-Yangs and Bonita filed an amended demand for arbitration on August 15, 1989, seeking about $72,000 in damages, including $50,000 for damages due to delay. Builder's did not file a response or counterclaim thereto, nor did it request any discovery.

Builder's objected to arbitrating a claim with Bonita, which it viewed as a stranger to the contract. At the continued hearing on September 12, 1989, Builder's contended the arbitrator had exceeded his authority in joining Bonita as a party, and it made a motion to stay the proceedings until it could obtain judicial review of that ruling. The arbitrator continued the hearing until October 5, 1989, to enable Builder's to seek relief in the superior court.

On October 3, 1989, Builder's filed a verified complaint in the superior court for damages and injunctive relief, naming the Au-Yangs, Bonita and the AAA. Builder's claimed it was owed about $6,000 for work which it had performed. In addition, Builder's sought to enjoin the named defendants from conducting an arbitration with Bonita as a party.

The trial court issued a temporary restraining order enjoining the conduct of arbitration proceedings with Bonita as a party, as well as an order to show cause re preliminary injunction.

The Au-Yangs and Bonita opposed the application for preliminary injunction, contending the trial court was without jurisdiction to decide the issue of whether Bonita was a proper party to the arbitration proceeding. They further argued: Builder's failure to challenge the arbitration agreement required the matter to be ordered back into arbitration; any basis for disagreeing with the arbitrator's joinder decision did not constitute grounds for enjoining the arbitration; irrespective thereof William Au-Yang's supporting declaration stated: in February 1988, he entered into an agreement with Bonita that for consideration, he and his family were to receive occupancy of the premises after renovation; on April 11, 1988, he entered into the remodeling contract with Builder's; in executing the contract he acted on Bonita's behalf; he and his wife paid $1,000 and Bonita paid the remaining balance, without objection by Builder's.

the joinder of Bonita was proper under California substantive law; and, Builder's had failed to demonstrate it would suffer hardship or irreparable harm if the arbitration were to go forward with Bonita as a co-claimant.

The matter was heard on October 18, 1989. The trial court denied the preliminary injunction, ruling: "Plaintiff failed to show that arbitrator had no jurisdiction to determine whether arbitration agreement between plaintiff and defendants Au-Yang signed by Au-Yang as principal or as agent for defendant Bonita Ace. Moreover, [the] 'all claims' language [in the arbitration clause] may be sufficient to bind plaintiff to arbitration as to any willing claimants."

Builder's appealed.

CONTENTIONS

Builder's contends the trial court erred in denying it relief from an arbitration which included Bonita because Bonita was not a party to the arbitration agreement.

DISCUSSION

1. General principles.

a. Injunctive relief.

Section 526, which specifies the grounds for issuance of an injunction, states in relevant part: "An injunction may be granted in the following cases: [p].... [p] 2. When it appears by the complaint or affidavits that the commission or continuance of some act during the litigation would produce waste, or great or irreparable injury, to a party in the action; ..."

Whether a preliminary injunction shall be granted rests largely in the discretion of the trial court and will not be reversed on appeal unless there is a manifest abuse of discretion. (Ingrassia v. Bailey (1959) 172 Cal.App.2d 117, 125, 341 P.2d 370.)

b. Rights of undisclosed principal.

"An agent represents his principal for all purposes within the scope of his actual or ostensible authority, and all the rights and liabilities which would accrue to the agent from transactions within such limit, if they had been entered into on his own account, accrue to the principal." (Civ.Code, § 2330, italics added.)

"A contract made by an agent for an undisclosed principal is for most purposes the contract of the principal, ..." (Bank of America v. State Bd. of Equal. (1962) 209 Cal.App.2d 780, 796, 26 Cal.Rptr. 348, italics added.) Unless excluded by the terms of the agreement made by the agent, an undisclosed principal may claim the benefits of the contract and may sue or be sued in his or her own name. (Schader v. White (1916) 173 Cal. 441, 445, 160 P. 557; Cowan v. Tremble (1931) 111 Cal.App. 458, 462, 296 P. 91; Purviance v. Shostak (1949) 90 Cal.App.2d 295, 297, 202 P.2d 755; Sumner v. Flowers (1955) 130 Cal.App.2d 672, 675, 279 P.2d 772; Wood Bldg. Corp. v. Griffitts (1958) 164 Cal.App.2d 559, 562, 330 P.2d 847; 2 Witkin, Summary of Cal. Law (9th ed. 1987) Agency and Employment, § 110, pp. 105-106.)

It therefore follows that an undisclosed principal may prosecute an arbitration in his or her own name. Whether or not Bonita, a nonsignatory to the contract, was a proper co-claimant, depends upon Bonita's relationship to the Au-Yangs, the signatories.

We next consider whether Bonita's status as the Au-Yangs' principal was a factual question for the arbitrator, or whether the proper forum for that determination is a court of law.

2. Arbitrator exceeded his broad authority in determining Bonita's status and ordering its joinder as a co-claimant.

a. General principles re arbitrator's authority.

Arbitrators necessarily have expansive powers to resolve controversies presented to them for determination. Section 1282.2, subdivision (c) states: "The neutral arbitrator shall preside at the hearing, shall rule on the admission and exclusion of evidence and on questions of hearing procedure and shall exercise all powers relating to the conduct of the hearing."

Further, " '[a]rbitration submissions are usually construed as broadly as possible in order that differences between the parties may be resolved quickly and economically. Under the rule of broad construction an arbitrator is authorized to determine all questions which he needs to determine in order to resolve the controversy submitted to him, and the arbitrator himself decides which questions need to be determined.' [Citations.]" (Van Tassel v. Superior Court (1974) 12 Cal.3d 624, 627, 116 Cal.Rptr. 505, 526 P.2d 969.)

b. Issue of Bonita's status must be resolved by trial court and cannot be delegated to arbitrator.

In Retail Clerks Union v. L. Bloom Sons Co. (1959) 173 Cal.App.2d 701, 344 P.2d 51, the union sought to compel L. Bloom Sons to arbitrate whether its collective bargaining contract applied to "Bloom's Salinas, Inc.", which the union claimed was being operated by L. Bloom Sons. The trial court dismissed without prejudice the union's petition to compel arbitration. It held the issue was one for the court's determination, but that ...