Otay River Constructors v. San Diego

• Decision Date: 07 January 2008
• Docket Number: No. D049612.,D049612.
• Citation: 70 Cal.Rptr.3d 434,158 Cal.App.4th 796
• Parties: OTAY RIVER CONSTRUCTORS, Plaintiff and Respondent, v. SAN DIEGO EXPRESSWAY, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

70 Cal.Rptr.3d 434

158 Cal.App.4th 796

OTAY RIVER CONSTRUCTORS, Plaintiff and Respondent, v. SAN DIEGO EXPRESSWAY, Defendant and Appellant.

No. D049612.

Court of Appeal, Fourth District, Division 1.

January 7, 2008.

Bell, Rosenberg & Hughes, Roger M. Hughes, Eric J. Phillips, Carol K. Watson,

Oakland, and James A. Melino for Appellant,

Wulfsberg, Reese, Colvig & Firstman, H. James Wulfsberg, Oakland, Luce, Forward, Hamilton & Scripps, Charles A. Bird and Roger C. Haerr, San Diego, for Respondent.

McINTYRE, J.

Where an action is brought solely to compel arbitration of contractual disputes between the parties, we conclude that (1) a party who succeeds in obtaining an order denying the petition to compel arbitration is a prevailing party in the action on the contract even though the merits of the parties' underlying contractual disputes have not yet been resolved and (2) an order denying a request for costs and attorney fees under such circumstances is appealable as a "special order after final judgment" under Code of Civil Procedure section 1294, subdivision (e). (All statutory references are to the Code of Civil Procedure unless otherwise specified.) Based on these conclusions, we reverse the order of the superior court denying fees and costs to the defendant herein.

FACTUAL AND PROCEDURAL BACKGROUND

In connection with its development of, two related highway projects in San Diego; County, San Diego Expressway, L.P. (Expressway) entered into two design-build contracts with general contractor Otay River Constructors (Otay) referred to herein as the Gap/Connector Contract and the Toll Road Contract (together the Design-Build Contracts). Thereafter, the parties entered into a third agreement called the Coordination Agreement, to ensure that the Design-Build Contracts "complement[ed] and supplemented] one another" and operated in a coordinated manner to allow completion of the two related projects. In the Coordination Agreement, the parties acknowledged that the work on both projects was interdependent and that Otay's failure to complete work governed by the Gap/Connector Contract would cause Expressway to incur substantial damages.

Each contract contained a dispute resolution provision governing disputes arising out of it. The Gap/Connector Contract provided that disputes would be resolved by project and executive level negotiations and then by a nonbinding Dispute Resolution Board ("Disputes Board") and, if necessary, litigation. The Toll. Road Contract contained similar dispute resolution procedures, but did not allow litigation and required binding arbitration. Disputes under the Coordination Agreement would be governed by the dispute resolution provision of the Toll Road Contract, i.e., binding arbitration.

Otay initiated two arbitration proceedings against Expressway, claiming that the disputes arose under the Coordination Agreement and that Expressway breached that contract by (1) demanding changes to certain drawings and (2) refusing to execute a change order adjusting the contract price to reflect necessary retaining walls. In its arbitration demands, Otay admitted that the claims arose under the Gap/Connector Contract, but argued that the claims presented a dispute under the Coordination Agreement and that under the Coordination Agreement binding arbitration was proper because the dispute procedures of the Toll Road Contract applied.

After Expressway denied the claims, Otay filed a petition in superior court to compel arbitration under the Coordination Agreement, arguing that the disputes arose under the Coordination Agreement and must be arbitrated. Expressway opposed the petition, arguing that it never agreed to submit Gap/Connector Contract disputes unrelated to the Coordination Agreement to binding arbitration.

The trial court rejected Otay's argument that the Coordination Agreement modified or superseded the terms of the Gap/Connector Contract and found no ambiguities and inconsistencies between the Coordination Agreement and the Gap/Connector Contract. It noted that the parties were very sophisticated and could easily have stated that the Coordination Agreement overrode the dispute resolution provisions of the Gap/Connector Contract, but that the parties intended to leave the dispute resolution procedures contained in the Gap/Connector Contract as is. Accordingly, it denied the petition to compel arbitration because the claims arose out of the Gap/Connector Contract, which allowed for litigation of the disputes. Otay did not appeal the order defying its petition to compel arbitration.

Thereafter, Expressway filed a motion for attorney fees and costs, claiming it was the prevailing party on the contract because it obtained a final order denying Otay's petition to compel arbitration. After bifurcating the issue of entitlement to attorney fees and costs from the issue of the amount of any award, the trial court denied Expressway's motion on the ground it was not a prevailing party because the parties contemplated additional litigation. Expressway timely appealed this order.

DISCUSSION

I. Appealability

Otay asserts we should dismiss this appeal because an order issued after an appealable order is not appealable under the California Arbitration Act (§ 1280 et seq.). As explained below, we conclude that the order denying Otay's petition to compel arbitration was essentially a judgment on the only issue before the trial court; accordingly, Expressway could properly appeal from the order denying its motion for an award of attorneys fees and costs under subdivision (e) of section 1294, which allows the appeal from "[a] special order after final judgment."

We have jurisdiction over a direct appeal only when there is an appealable order or an appealable judgment. (Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 696, 107 Cal.Rptr.2d 149, 23 P.3d 43 (Griset).) A judgment is defined as "the final determination of the rights of the parties in an action or proceeding" (§ 577) and it is the substance and effect of an adjudication that is determinative, not the form of the decree. (Lyon v. Goss (1942) 19 Cal.2d 659, 670, 123 P.2d 11.) As a general test, an order constitutes the final determination of a case "where no issue is left for future consideration except the fact of compliance or noncompliance with the terms of the first decree[.]" (Griset, supra, 25 Cal.4th at p. 698, 107 Cal.Rptr.2d 149, 23 P.3d 43, citing Lyon v. Goss, supra, 19 Cal.2d at p. 670, 123 P.2d 11.)

Before the 1961 revision of the arbitration act, former section 1293 provided that a party could only appeal from "an order confirming, modifying, correcting or vacating an award, or from a judgment entered upon an award[.]" (Sjoberg v. Hastorf (1948) 33 Cal.2d 116, 117, 199 P.2d 668; Application of Hohn (1964) 229 Cal.App.2d 336, 338, 40 Cal.Rptr. 125.) At that time, when an action was brought on a contract and a defendant petitioned to compel arbitration, an order dismissing or denying the petition to compel arbitration was not appealable because it was regarded as essentially a cross-complaint for specific performance of a contract to arbitrate, and its denial or dismissal did not terminate the main action on the contract. (Sjoberg v Hastorf supra, 33 Cal.2d at p. 118, 199 P.2d 668.) However, if no action was brought on the contract and one party petitioned the court for an order directing arbitration, a special proceeding was initiated and the order denying the petition was appealable as a final judgment in that special proceeding. (Squire's Dept. Store v. Dudum (1953) 115 Cal.App.2d 320, 330, 252 P.2d 418.)

In discussing proposed changes to the arbitration act, the California Law Revision Commission noted this case law and stated it was unclear whether an appeal from an order denying a motion to compel arbitration is taken under former section 1293 or under former section 963, now section 904.1 (Stats.1968, ch. 385, p. 811), which related to appeals in civil proceedings generally. (Recommendation Relating to Arbitration (Dec.1960) 3 Cal. Law Revision Com. Rep. (1960) p. G-60.) Accordingly, it advised the Legislature to clarify that an order denying a motion to compel arbitration is appealable and provide for such in the arbitration statute. (Ibid.)

The Legislature followed the Commission's recommendation and, effective September 1961 (Stats.1961, ch. 461, § 2, p. 1540), the arbitration act made appealable: (a) an order dismissing or denying a petition to compel arbitration; (b) an order dismissing a petition to confirm, correct or vacate an award; (c) an order vacating an award unless a rehearing in arbitration is ordered; (d) a judgment entered pursuant to this title; and (e) a special order after final judgment. (§ 1294.)

The provisions of the Code of Civil Procedure concerning arbitration, including petitions to compel arbitration (§ 1290), are all found in part 3 of the Code of Civil Procedure, which pertains to special proceedings. Because the Legislature created a comprehensive procedural scheme to govern arbitration proceedings, we reject Expressway's contention that section 904.1, governing appeals in civil proceedings generally, provides the authority for this appeal. With this said, however, courts have looked to cases interpreting section 904.1 for guidance in interpreting section 1294. (Lamb v. Holy Cross Hospital (1978) 83 Cal.App.3d 1007, 1011, 148 Cal.Rptr. 273; Lovret v. Seyfarth (1972) 22 Cal.App.3d 841, 852, 101 Cal.Rptr. 143.)

Section 904.1 effectively codified the "one final judgment rule," allowing only final judgments to be appealable. (9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, §§ 57-59, pp. 113-115; Eisenberg et al. Cal. Practice Guide: Civil Writs & Appeals (The Rutter Group 2007) §§ 2.21-2.23, pp. 2-17 to 2-18.) As our high court explained, "finality" is an attribute of every judgment the moment it is rendered and finality "not only makes a judicial determination a judgment,...