Stein v. Drake
| Decision Date | 20 March 1953 |
| Citation | 116 Cal.App.2d 779,254 P.2d 613 |
| Court | California Court of Appeals Court of Appeals |
| Parties | STEIN et al. v. DRAKE. DRAKE v. STEIN et al. Civ. 19250. |
Arthur F. Larrabee, Los Angeles, for appellants.
Nat C. Recht, Los Angeles, for respondent.
This is an appeal from a judgment entered upon an order confirming an arbitrator's award. The questions for decision are (1) the sufficiency of an arbitration clause in a written contract providing that 'all questions as to the rights and obligations of the parties arising under the terms of the contract, the plans and specifications are subject to arbitration'; (2) the revocability of such a clause, and (3) the sufficiency of compliance with the requisite statutory formalities.
Facts.
Appellants and respondent contracted on March 18, 1951 for the substantial alteration of premises owned by appellants at Los Angeles. Respondent was to perform the work 'in a good, workmanlike and substantial manner,' to 'commence work hereunder within 2 days after receipt of written notice from the owner so to do,' and 'in any and all events to complete the same within 70 days after commencement.' As consideration for respondent's performance, in lieu of money, appellants agreed to transfer a parcel of realty to respondent by deed guaranteed by 'Policy of Title Insurance in the amount of $7,500 as per terms and conditions' in a designated escrow. Time was declared to be of the essence. The following arbitration clause was adopted as paragraph 16 of the contract:
At the end of May 1951, a dispute arose and respondent ceased work on the project. On July 3, 1951, the parties executed an 'arbitration agreement' by which two arbitrators were designated: Attorney Earl J. Opsahl by appellants, and George Heller by respondent. Appellants withdrew Opsahl's name and the attempt at settlement failed. Appellants' new counsel then notified respondent that 'the agreement heretofore entered into is cancelled inasmuch as [Drake] has failed to do the work in a workmanlike and substantial manner.' On July 21 Drake's demand for arbitration was rejected and Heller proceeded to act as sole arbiter and as such made a purported 'arbitration award' that the Steins pay Drake $5,149. He awarded himself $200 as a fee for his own services, one-half to be paid by appellants, the balance by respondent. The main award was based on findings that 'the contract price for the work to be done * * * [was] Seventy-five Hundred Dollars'; that the owners had agreed to pay $100 additional for certain changes; that 'prior to the time the work was to have been completed the contractor was ordered to discontinue any further work on the job'; that the reasonable cost to complete the job in accordance with the plans and specifications will be $2,451.
Three days later Drake filed a petition in the Superior Court for an order confirming the award. Judgment in accordance with the terms thereof was entered but was vacated on appellants' motion on December 4, 1951 on account of Drake's failure to plead compliance with the contractor license laws as set forth in section 7031 of the Business and Professions Code. On respondent's amended petition the trial court confirmed the award and included $1000 for attorney's fees. Appellants' motions (1) to vacate the award and (2) for a new trial were denied.
Sufficiency and Revocability of the Agreement.
Appellant contends that paragraph 16 was not sufficiently complete to be enforceable and that moreover the contract 'had been cancelled or revoked by [the Steins] upon equitable or legal grounds.' Although appellant is correct in contending that generally a submission agreement is a prerequisite to the commencement of a valid arbitration proceeding, see 3 Am.Jur., Arbitration and Award, sec. 16; 5 Cal.Jur.2d, Arbitration and Award, sec. 24; Kagel, Labor and Commercial Arbitration Under the California Arbitration Statute, 38 Cal.L.Rev. 799, 803-5, yet 'where the parties have executed an arbitration agreement, they undoubtedly may use it as a submission agreement as soon as the controversy arises.' 5 Cal.Jur.2d, supra. It is apparent from the inspection of the contract that paragraph 16 is properly interpreted as both a 'future dispute agreement', see Sturges, Commercial Arbitrations and Awards, sec. 26 et seq., within section 1280 of the Code of Civil Procedure, and a complete though broad 'submission agreement.' The issues to be submitted to arbitration under the latter were to include 'all questions as to the rights and obligations of the parties arising under the terms of the contract, the plans and specifications.'
Could appellants, as they claim, have 'cancelled' a contract containing such a clause? Section 1280 of the Code of Civil Procedure states that 'an agreement in writing to submit an existing controversy to arbitration pursuant to section 1281 of this code, shall be valid, enforceable and irrevocable'. This leaves open the theoretical argument that there can be an agreement to arbitrate not 'pursuant to section 1281 of this code'; i. e. under 'common-law arbitration.' In that event, the agreement to arbitrate would be revocable until the time of the final award. See 3 Am.Jur., Arbitration and Award, sec. 59; 6 C.J.S., Arbitration and Award, § 33; 5 Cal.Jur.2d, Arbitration and Award, sec. 4.
Since the 1927 amendments and additions to the Code of Civil Procedure, Stats.1927, p. 404, adopting the Draft State Arbitration Act, no California case has expressly decided whether or not a written contract can be the basis of common-law, as well as statutory, arbitration. Those decisions which have considered the matter have only done so in the form of innocuous dictum. See Silva v. Mercier, 33 Cal.2d 704, 708, 204 P.2d 609; Rives-Strong Bldg., Inc., v. Bank of America, etc., 50 Cal.App.2d 810, 813, 123 P.2d 942.
However, the case at bar does not involve an 'existing controversy agreement' but a future disputes agreement. Such an agreement shall be 'valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract'. Code Civ.Proc. sec. 1280. The possible coexistence of common-law and statutory arbitration of existing controversies has no application to the facts of this case. It is clear from the explicit and unambiguous language of section 1280 that the legislative intent was to make written contracts to arbitrate future disputes irrevocable, in direct derogation of the common law. Accordingly, assuming the absence of the elements necessary to permit a...
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