Gonzales v. Interinsurance Exchange

• Decision Date: 21 August 1978
• Court: California Court of Appeals Court of Appeals
• Parties: In the matter of the arbitration between Steven GONZALES, Petitioner and Appellant, v. INTERINSURANCE EXCHANGE OF AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA, Respondent. Civ. 52744.

Page 282

148 Cal.Rptr. 282

84 Cal.App.3d 58

In the matter of the arbitration between Steven GONZALES, Petitioner and Appellant, v. INTERINSURANCE EXCHANGE OF AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA, Respondent.

Civ. 52744.

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

Aug. 21, 1978.

Hearing Denied Oct. 18, 1978.

Joseph M. Fredrics, Los Angeles, for petitioner and appellant.

Gilbert, Kelly, Crowley & Jennett, Patrick A. Mesisca, Jr., Los Angeles, for respondent.

ALLPORT, Associate Justice.

Steven Gonzales appeals from an order of dismissal entered following sustaining of a demurrer to his third amended petition to vacate an arbitration award. The demurrer was sustained without leave to amend for failure to state facts sufficient to constitute a cause of action. The appeal lies. (Code Civ.Proc., § 1294 subd. (b).)

Facts

The petition sought to vacate an arbitration award made by an arbitrator appointed by the American Arbitration Association pursuant to the uninsured motorist portion of petitioner's automobile insurance policy issued by respondent Interinsurance Exchange of the Automobile Club of Southern California. Petitioner was awarded $9,000 for painful chest injuries including possible fractures of three ribs and minimal shoulder and back complaints. In pertinent part the petition alleged:

"6. That the arbitrator substantially prejudiced the petitioner's rights by failing to consider the medical evidence before him. That he exceeded his powers in the method and means he used in making his award and that his conduct in making the award was contrary to the provisions of the arbitration statute, in that he analogized his personal experiences and injuries in making the award and compared his own personal injuries to that of the petitioner, the arbitrator being some 40 years older than the petitioner.

That the arbitrator committed misconduct, substantially prejudicing petitioner's rights by failing to disclose that he had similar injuries to petitioner and that he therefore was prejudiced to any claim of continuing medical problems by others with these (sic) type of injuries.

7. That the arbitrator committed misconduct by failing to disclose to the Petitioner that he knew ROGER KELLY, as the senior partner of defendant's law firm for a period of 40 years; that said senior partner courted and dated said arbitrator's sister-in-law for many years; that the arbitrator and the aforesaid partner of Respondent's law firm are 'good friends', and maintain to this date a personal relationship which existed at the time of the arbitration."

Contention

It is contended on appeal that the court below erred in concluding the petition failed to state facts sufficient to constitute a cause of action. We do not agree with this contention and for reasons to follow will affirm.

Discussion

The statutory grounds upon which a court may vacate an arbitration award are set forth in Code of Civil Procedure section 1286.2, as follows:

"(a) The award was procured by corruption, fraud or other undue means;

(b) There was corruption in any of the arbitrators;

(c) The rights of such party were substantially prejudiced by misconduct of a neutral arbitrator;

(d) The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted; or

(e) The rights of such 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."

Our examination of the petition reveals but three possible grounds for vacating the award. One, that the arbitrator failed to "consider the medical evidence before him." Two, that he failed to disclose the existence of a "personal relationship" of many years standing with the senior partner of the law firm employed to represent respondent insurance company. Three, that he failed to disclose the existence of personal injuries previously suffered by himself and other physical disabilities that he had which were referred thereto in equating the nature and extent of the injuries suffered by petitioner in the instant case. ¹ We now proceed to examine each of these three possible grounds for vacating the award bearing in mind that we are required to accept all allegations as susceptible of proof and determine therefrom the sufficiency of the petition as a matter of law. (Shaeffer v. State of California (1970) 3 Cal.App.3d 348, 354, 83 Cal.Rptr. 347; Roberts v. Wachter (1951) 104 Cal.App.2d 281, 287-288, 231 P.2d 540.)

First, we must determine whether alleging a failure to Consider evidence is tantamount to alleging a refusal to Hear evidence. ² We believe that it is not. Webster defines the words consider and hear to leave no other conclusion. Hear is "To perceive by the auditory sense; to take cognizance of by ear; to give audience or allowance to speak; to listen to . . . ." Consider is "to view attentively . . . to fix the mind on, with a view to careful examination; to think on with care; to ponder; to study; to meditate on; . . ." It is obvious from these definitions that the two words are not synonymous. One cannot "consider" what one has refused to "hear." Legally speaking the admission of evidence is to hear it, and the weighing of it is to give it consideration. The failure to allege a refusal to hear evidence renders this petition fatally defective in this respect, since failure to consider evidence is not a ground to vacate the award. By reference to the arbitrator's opinion, which is attached to the petition, it is clear that medical evidence was both heard and considered belying allegations to the contrary in the petition itself.

Second, with respect to "personal relationship" being a basis for vacating the award, we are immediately confronted with the statement in Canadian Indem. Co. v. Ohm (1969) 271 Cal.App.2d 703, 707, 76 Cal.Rptr. 902, 904, wherein this court said, "The sole grounds for vacating an arbitration award are those set forth in Code of Civil Procedure, section 1286.2." (Citation omitted.) Without more we would be inclined to agree with the implied conclusion of the court below that a personal relationship is not a ground for vacating the award and would affirm. However, loose language in Johnston v. Security Ins. Co. of Hartford (1970) 6 Cal.App.3d 839, 86 Cal.Rptr. 133, requires us to think twice before reaching such a conclusion. In Johnston, it was said at pages 842-843, 86 Cal.Rptr. at page 135:

"The basis of respondent's petition for vacation of the award as set forth in its petition and its counsel's declaration purportedly in support thereof is that the neutral umpire failed to disclose his acquaintanceship with the claimants' counsel and the attorney appointed by claimants as an appraiser and of the business dealings past and projected with that attorney-appraiser. The petition to vacate the award further alleges that if those matters had been disclosed at the outset, respondent 'would have objected to the appointment of William R. Walsh as "neutral" umpire.' "

Relying heavily upon Commonwealth Coatings Corp. v. Continental Cas. Co. (1968) 393 U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d 301, construing federal law practically identical with that expressed in section 1286.2, the Johnston court went on to say 6 Cal.App.3d at pages 841-842, 86 Cal.Rptr. at page 134:

"Notwithstanding this express enumeration by statute as to the grounds upon which a federal court can vacate an arbitration award, the United States Supreme Court in the Commonwealth Coatings case, Supra, held that even in the absence of any showing of actual fraud, corruption, or partiality on the part of the third (neutral) arbitrator, his failure to disclose even sporadic but substantial business relationships with a party to the arbitration constituted legal cause for vacating the award."

concluding at pages 843-844, 86 Cal.Rptr. at page 136:

"Thus the undisputed facts bring this facet of the arbitration proceedings under review within the zone where the rule of Commonwealth Coatings is applicable. The difference in the acquaintanceship being with claimants' counsel and appraiser Burgard and the business dealings being with Burgard instead of directly with the claimants, or any of them, is insufficient to remove the acquaintanceship and dealings beyond the scope of creating an impression of bias.

Walsh, the neutral umpire or arbitrator, should have disclosed his acquaintanceship with claimants' counsel and Burgard and his past and prospective business dealings with Burgard. The fact that no actual fraud or bias was charged or proved against the neutral umpire is immaterial. We do not intend by our decision to imply any actual wrong dealings by Burgard, Walsh, or by claimants' counsel. Nevertheless Walsh was under a legal duty to 'disclose to the parties any dealings that might create an impression of possible bias' at the outset of the hearings. The superior court, therefore, was correct in ordering the award vacated."

We interpret Johnston as holding that the failure to disclose the existence of an acquaintanceship Involving a substantial business relationship may indicate a possible...