Moshonov v. Walsh

• Decision Date: 17 April 2000
• Docket Number: No. S076103.,S076103.
• Citation: 996 P.2d 699,94 Cal.Rptr.2d 597,22 Cal.4th 771
• Court: California Supreme Court
• Parties: Robin MOSHONOV, Plaintiff and Respondent, v. John D. WALSH et al., Defendants and Appellants.

94 Cal.Rptr.2d 597

22 Cal.4th 771

996 P.2d 699

Robin MOSHONOV, Plaintiff and Respondent, v. John D. WALSH et al., Defendants and Appellants.

No. S076103.

Supreme Court of California.

April 17, 2000.

John D. Walsh, in pro. per., for Defendant and Appellant.

Law Offices of Thomas J. LaLanne and Thomas J. LaLanne, San Francisco, for Defendants and Appellants Eladia Ganulin and Marty Ganulin.

Tanke & Willemsen, Tony J. Tanke, Redwood City, and Karen Bautista Hobin, for Plaintiff and Respondent.

WERDEGAR, J.

This multiparty dispute arising out of a real estate purchase was submitted, on stipulation of all parties, to binding arbitration. The arbitrator found for defendants, the sellers. Although the real estate purchase agreement contained a clause providing for reasonable attorney fees to the prevailing party in an "arbitration or suit ... brought to enforce the terms of this contract or any obligation herein," and although the arbitrator found defendants were the prevailing parties on the complaint and on a cross-complaint, the arbitrator refused to award defendants any fees, reasoning that the contractual attorney fees clause was not broad enough to encompass the claims against defendants, claims the arbitrator found were noncontractual in nature.

The superior court denied defendants' motion to correct the award (Code Civ. Proc., § 1286.6)¹ to include an award of attorney fees; the Court of Appeal affirmed. We conclude the lower courts acted correctly: where an arbitrator's denial of fees to a prevailing party rests on the arbitrator's interpretation of a contractual provision within the scope of the issues submitted for binding arbitration, the arbitrator has not "exceeded [his or her] powers" (§§ 1286.2, subd. (d), 1286.6, subd. (b)) as we have understood that narrow limitation on arbitral finality. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 28, 10 Cal.Rptr.2d 183, 832 P.2d 899 (Moncharsh); Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376-381, 36 Cal.Rptr.2d 581, 885 P.2d 994 (Advanced Micro Devices).)

PROCEDURAL BACKGROUND

Plaintiff Robin Moshonov sued defendants John D. Walsh and Eladia and Marty Ganulin for damages arising out of plaintiffs purchase from defendants of a residential property in San Francisco. In addition to being the sellers, Walsh provided architectural plans for renovating the property and the Ganulins, doing business as Unique Homes, acted as the sellers' broker for the transaction. The complaint set out five causes of action against all defendants: negligence in advising plaintiff of the property's condition, the Ganulins' ownership interest, the accuracy of Walsh's plans, and the difficulty of evicting a tenant in possession; intentional misrepresentation and concealment as to the same matters; violation of "numerous State and local statutes, including but not necessarily limited to Civil Code § 1102 and § 1710"; intentional infliction of emotional distress; and negligent infliction of emotional distress.

Defendants answered and cross-complained against each other and against Richard Jarrette Kahn, Moshonov's agent in the purchase and subsequently her contractor on the renovation. Kahn, in turn, cross-complained against defendants.

The real estate purchase contract contained the following attorney fees clause: "Should arbitration or suit be brought to enforce the terms of this contract or any obligation herein, including any action by Broker(s) to recover commissions, the prevailing party shall be entitled to reasonable attorney's fees." Fees were prayed for in the original complaint, the Ganulins' cross-complaint, Walsh's cross-complaint, the Ganulins' answer to Walsh's cross-complaint, Kahn's answer to the Ganulins' cross-complaint, Kahn's cross-complaint, and the Ganulins' answer to Kahn's cross-complaint.

Before trial, all parties agreed "to send this matter to binding arbitration" before an arbitrator selected from the San Francisco Superior Court's panel, with the further stipulation that "the Rules of Court shall govern the hearing of that arbitration." The stipulation for arbitration did not expressly address attorney fees.

After hearing and briefing, the arbitrator ruled for defendants. The award provided that plaintiff would take nothing on her complaint and Kahn would take nothing on his cross-complaint. The defendants' cross-complaints were deemed moot. The award provided that defendants were entitled to recover their costs, but made no specific provision for recovery of attorney fees.

The Ganulins moved in superior court to confirm the award and for an order naming them as prevailing parties and awarding them attorney fees. Upon considering the motion and opposition, the superior court remanded the case to the arbitrator "to determine whether attorneys fees are to be awarded, and, if so, to determine the appropriate amounts."

On remand, the arbitrator denied all defendants' requests for attorney fees. The arbitrator found defendants were the prevailing parties and were entitled to their costs of suit, but ruled the underlying contract did not provide for attorney fees on the tort actions pled against defendants: "4. The attorneys' fee provision at issue in this case is distinguishable from those discussed in Xuereb v. Marcus & Millichap, 3 Cal.App.4th 1338, 5 Cal. Rptr.2d 154 (1992), and its progeny. Unlike the latter, which provide for recovery of attorneys' fees in actions `arising out of the agreement or to which the agreement `gives rise,' the provision here specifically limits fee recovery to proceedings `brought to enforce the terms of this contract or any obligation herein.' Accordingly, it is not broad enough to encompass non-contractual claims. [¶] 5. The Stipulation of All Parties to Send Action and All Cross Actions to Arbitration does not provide that the prevailing party is entitled to recover his or her arbitration expenses and fees."

Relying on DiMarco v. Chaney (1995) 31 Cal.App.4th 1809, 37 Cal.Rptr.2d 558 (Di-Marco ), the Ganulins moved the superior court to correct the award pursuant to section 1286.6, subdivision (b), so as to award them attorney fees. The court, finding the arbitrator had not exceeded her powers in denying the fees, denied the motion and entered judgment on the arbitration awards.

The Court of Appeal affirmed. The court declined to review the merits of the arbitrator's decision on fees. Relying on this court's decision in Moncharsh, supra, 3 Cal.4th 1, 10 Cal.Rptr.2d 183, 832 P.2d 899, and expressly disagreeing with Di-Marco, supra, 31 Cal.App.4th 1809, 37 Cal. Rptr.2d 558, the Court of Appeal held that "[w]hether or not the arbitrator correctly interpreted the [attorney fees] clause, the award is not subject to judicial review on the basis of an error of law."

We granted the Ganulins' petition for review.

DISCUSSION

In Moncharsh, this court held judicial review of private, binding arbitration awards is generally limited to the statutory grounds for vacating (§ 1286.2) or correcting (§ 1286.6) an award; we rejected the view that a court may vacate or correct the award because of the arbitrator's legal or factual error, even an error appearing on the face of the award. (Moncharsh, supra, 3 Cal.4th at pp. 8-28, 10 Cal. Rptr.2d 183, 832 P.2d 899.) We further explained that arbitrators do not "exceed[ ] their powers" within the meaning of section 1286.2, subdivision (d) and section 1286.6, subdivision (b) merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators. "The arbitrator's resolution of these issues is what the parties bargained for in the arbitration agreement." (Moncharsh, supra, at p. 28, 10 Cal. Rptr.2d 183, 832 P.2d 899.)

We agree with the courts below that, under the principle of arbitral finality as explained in Moncharsh, the arbitrator's award in the present case could not be judicially corrected to award defendants their attorney fees. As discussed above, all parties had prayed for fees in their various pleadings. The parties then submitted "this matter" to binding arbitration, without any pertinent limitation on the issues to be arbitrated.² Under the agreed rules of arbitration, the California Rules of Court ordinarily governing judicial arbitration, the arbitrator was empowered "to decide the law and facts of the case and make an award accordingly." (Cal. Rules of Court, rule 1614(a)(7).) The award was to "determine all issues properly raised by the pleadings, including a determination of any damages and an award of costs if appropriate." (Id., rule 1615(a).) The arbitrator was expressly empowered "to award costs, not to exceed the statutory costs of the suit." (Id., rule 1614(a)(8); see § 1033.5, subd. (a)(10)(A) [attorney fees allowable as costs when authorized by contract].) Under these circumstances, the arbitrator had the power to decide the entire matter of recovery of attorney fees. The recovery or nonrecovery of fees being one of the "contested issues of law and fact submitted to the arbitrator for decision" (Moncharsh, supra, 3 Cal.4th at p. 28,10 Cal.Rptr.2d 183,832 P.2d 899), the arbitrator's decision was final and could not be judicially reviewed for error.

The Ganulins argue that the disputed merits of the case, which they concede the arbitrator had final authority to decide, did not include questions of costs, such as attorney fees. They characterize the latter as merely "incident" to the judgment and outside the merits submitted for arbitration. The Court of Appeal correctly disposed of this argument as follows: "We do not think, however, that the term `the merits of the decision' [(§ 1286.6, subd. (b))] is subject to any fixed meaning, incorporating a distinction between substantive issues and procedural remedies. The meaning of the phrase must rather be found in the terms of the submission. As we have noted, the parties here effectively submitted...