Morris v. Zuckerman

• Decision Date: 26 November 1968
• Citation: 446 P.2d 1000,72 Cal.Rptr. 880,69 Cal.2d 686
• Court: California Supreme Court
• Parties: , 446 P.2d 1000 B. R. MORRIS, Plaintiff and Appellant, v. E. K. ZUCKERMAN, Defendant and Respondent. L.A. 29586.

Page 880

72 Cal.Rptr. 880

69 Cal.2d 686, 446 P.2d 1000

B. R. MORRIS, Plaintiff and Appellant, v. E. K. ZUCKERMAN, Defendant and Respondent.

L.A. 29586.

Supreme Court of California In Bank.

Nov. 26, 1968.

Rehearing Denied Dec. 24, 1968.

Eddy S. Feldman, Los Angeles, for plaintiff and appellant.

Musick, Peeler & Garrett and Edward J. Riordan, Los Angeles, for defendant and respondent.

McCOMB, Justice.

Plaintiff appeals from a judgment denying his petition to vacate an arbitrators' award, as corrected, and confirming the award as requested by defendant.

Facts: On September 18, 1952, Mutual Housing Association, as 'Seller,' and Grandview Building Co., as 'Buyer,' entered into an agreement with respect to certain undeveloped real property in the Brentwood area of Los Angeles. By virtue of a written assignment in 1956, Mutual Withdrawees, Inc. (hereinafter referred to as 'MWI') succeeded to the rights of Mutual Housing Association.

On January 2, 1963, in accordance with a plan for the dissolution of Grandview, that portion of the property which had not been developed pursuant to the 1952 agreement was conveyed to Grandview's sole shareholders, plaintiff and defendant, each receiving an undivided one-half interest. Each agreed to be personally bound by the 1952 agreement, and MWI consented in writing to the transfer on or about January 19, 1963.

Under the 1952 agreement, the 'Seller' (then Mutual Housing Association, Inc., now MWI) retained certain interests in the property, including a security interest under a deed of trust and the right to receive a share of the proceeds on a sale of the property by Grandview.

The obligations of the 'Buyer' (then Grandview, now plaintiff and defendant) under the 1952 agreement included the following: (1) To complete the subdivision improvements in 'Tract 15905'; (2) to make engineering studies of the property; (3) to subdivide and record not less than 12 lots during each calendar year after December 31, 1952; (4) to make installment payments of principal and interest on deeds of trust encumbering the property; and (5) to pay the 'Seller' a proportionate share of all net sales proceeds received. ¹

Grandview fulfilled each of its obligations as 'Buyer' under the 1952 agreement except the one referred to in (3) above. In no calendar year after December 31, 1954, did either Grandview or its successors (plaintiff and defendant) record 12 lots. The pertinent provision of the 1952 agreement provided that in the event of such a default, the 'Seller' was authorized to 'demand that Buyer put the remaining unrecorded property up for sale, and Buyer hereby agrees, upon receipt of such demand so to do at such prices as are determined by Seller.'

By letter of November 24, 1959, MWI demanded, pursuant to the above clause, that Grandview 'place all of the remaining unrecorded property on the market for sale at a total price of $1,640,000.' Grandview by letter dated February 1, 1960, acknowledged receipt of the demand and indicated its compliance therewith.

On February 14, 1964, MWI entered into an agreement for the sale of the remaining unrecorded property to 'Dayton Realty Co., a Corporation or nominee,' for $1,700,000. Dayton Realty Co. is wholly owned by plaintiff and his wife and is controlled by plaintiff.

Although MWI was aware of defendant's rights under the 1952 agreement, it negotiated the proposed agreement with plaintiff alone and gave no notice of the transaction to defendant until February 18, 1964, at which time it demanded that both plaintiff and defendant execute the proposed agreement as successors in interest of Grandview.

On February 28, 1964, defendant communicated his willingness to sign the proposed agreement on the condition that his right to participate as a 'buyer' thereunder with plaintiff, acting through Dayton, be acknowledged. His offer, however, was rejected.

On or about March 5, 1964, MWI, Dayton, and plaintiff opened an escrow relating to the proposed sale to Dayton. By letter dated March 27, 1964, MWI again demanded that defendant sign the proposed agreement, together with escrow instructions which had been sent to him. Defendant refused to do so, and MWI thereupon demanded arbitration, pursuant to paragraph 21 of the 1952 agreement. ²

After arbitrators had been duly selected, plaintiff, defendant, and MWI submitted the following controversy to them: 'Whether Mr. E. K. Zuckerman, as one of the successors to Grandview Building Co., is required under the terms and conditions of the agreement between Mutual Housing Association, Inc., and Grandview Building Co., dated September 18, 1952, to execute that certain proposed agreement of sale and set forth in a document dated February 14, 1964, entitled 'Agreement of Sale' and other documents necessary or convenient to carry out its terms.'

Extensive hearings were held, and, upon submission, briefs were presented on behalf of all the parties. Thereafter, the arbitrators made their award, which was, in pertinent part, to the following effect: (1) Defendant is required under the terms and conditions of the 1952 agreement to execute the proposed agreement of sale and other documents necessary or convenient to carry out its terms, on the following conditions: (a) That plaintiff, Dayton, and MWI modify the proposed agreement so as to provide for the sale of the subject property to defendant and Dayton as tenants in common, each as to an undivided one-half interest, and (b) that the distribution of proceeds of sale be computed according to the terms set forth in the 1952 agreement. (2) If the conditions set forth above are not complied with, defendant is not required to execute the proposed agreement.

Plaintiff filed a petition in the superior court to vacate the award upon all the grounds specified by section 1286.2 of the Code of Civil Procedure ³ and for a rehearing before new arbitrators under section 1286.8, but principally upon the ground that the arbitrators had exceeded their powers. Defendant, Dayton, and MWI were named as respondents. After both a hearing and a rehearing, the superior court entered its order confirming the award and denying the petition to vacate the award.

Question: Did the arbitrators go beyond the scope of the submission agreement in making their determination?

No. Plaintiff contends that the submission agreement called for a 'yes' or 'no' answer and that the arbitrators were not authorized to make their determination dependent upon conditions. Section 1283.4 of the Code of Civil Procedure, however, provides: 'The award shall be in writing and signed by the arbitrators concurring therein. It shall include a determination of All the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy.' (Italics added.)

It is for the arbitrators to determine which issues were actually 'necessary' to the ultimate decision. (See Grunwald-Marx Inc. v. L. A. Joint Board, 52 Cal.2d 568, 589--590, 343 P.2d 23.) Likewise, any doubts as to the meaning or extent of an arbitration agreement are for the arbitrators and not the court to resolve. (See O'Malley v. Wilshire Oil Co., 59 Cal.2d 482, 490--491, 30 Cal.Rptr. 452, 381 P.2d 188 (collective bargaining agreement); Morris v. Zuckerman, 257 A.C.A. 104, 107--110, 64 Cal.Rptr. 714; Cook v. Superior Court, 240 Cal.App.2d 880, 885--886, 50 Cal.Rptr. 81.)

It should be noted, also, that 'Neither the merits of the controversy * * * nor the sufficiency of the evidence to support the arbitrator's award are matters for judicial review.' (Jordan v. Pacific Auto Ins. Co., 232 Cal.App.2d 127, 135(7), 42 Cal.Rptr. 556, 561.) Although the court may vacate an award if it determines that '(t)he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted' (Code Civ.Proc. § 1286.2, subd (d)), it may not substitute its judgment for that of the arbitrators.

Arbitrators can apply both legal and equitable principles in deciding the ultimate issue submitted to them. (Sapp v. Barenfeld, 34 Cal.2d 515, 523(12), 212 P.2d 233.) In the present case, it is clear that the fiduciary relationship between all the parties was the principal ground determining the arbitrators' award ⁴ and that such issue was actually submitted to them.

In written 'Contentions of Law and Fact,' filed by MWI with the arbitrators at the commencement of the hearings and adopted by plaintiff, it is stated that the 1952 agreement was 'essentially one of joint venture.' It is also stated, '* * * MHA (Mutual Housing Association) contracted with Grandview in the form of Exhibit 1 (the agreement of September 18, 1952) to bail MHA out of its difficulties and to form a joint venture for an eventual recoupment of MHA's investment.' Numerous other references are made to the fact that the parties regarded themselves as joint venturers.

Likewise, in MWI's 'Contentions of Law and Fact,' the contentions of MWI, and thus of plaintiff, are set forth, as follows: '1. Zuckerman must sign Exhibits 3 and 11 because the plain language of the contract gives him no discretion to do otherwise.

'2. A party to a contract is required to act reasonably and there is no reasonable grounds (sic) for Zuckerman withholding his signature.

'3. Zuckerman is quasi-estopped to say that the agreement should not be signed when he is taking the position that he is the buyer under the agreement.'

The second contention set forth above required the arbitrators to analyze the terms and conditions of the proposed agreement with Dayton, as well as the escrow instructions, to determine the reasonableness and fairness of the proposed transaction as to defendant in light of the respective rights and duties of the parties under the 1952 agreement. This, of necessity, required the arbitrators to determine whether or not a fiduciary relationship existed between the parties by virtue of the 1952 ...