Valsan Partners Limited Partnership v. Calcor Space Facility, Inc.

• Decision Date: 07 June 1994
• Docket Number: No. B077484,B077484
• Citation: 30 Cal.Rptr.2d 785,25 Cal.App.4th 809
• Court: California Court of Appeals Court of Appeals
• Parties: VALSAN PARTNERS LIMITED PARTNERSHIP, Plaintiff and Appellant, v. CALCOR SPACE FACILITY, INC., Defendant and Respondent.

Page 785

30 Cal.Rptr.2d 785

25 Cal.App.4th 809

VALSAN PARTNERS LIMITED PARTNERSHIP, Plaintiff and Appellant, v. CALCOR SPACE FACILITY, INC., Defendant and Respondent.

No. B077484.

Court of Appeal, Second District, Division 5, California.

June 7, 1994.

[25 Cal.App.4th 812] Scott E. Wood, Los Angeles, for plaintiff and appellant.

Freshman, Marantz, Orlanski, Cooper & Klein, Jeffrey L. Davidson, Beverly Hills, and Matthew C. Thompson, Los Angeles, for defendant and respondent.

GODOY PEREZ, Associate Justice.

Plaintiff and appellant Valsan Partners Limited Partnership ("Valsan") appeals from the trial court order denying its petition to compel arbitration with defendant and respondent Calcor Space Facility, Inc. ("Calcor"). It has also appealed the trial court order purporting to enforce the judgment entered in confirmation of one arbitration award and the order entering judgment after confirmation of another arbitration award. For the reasons set forth below, all three orders and the concomitant judgment are reversed.

FACTS AND PROCEDURAL HISTORY

These matters arise from a 1987 contract ("the agreement" or "the contract") between Valsan and Calcor by which Calcor would manufacture and Valsan would buy certain components used to modify commercial aircraft engines ("the units"). The agreement contemplated the purchase of an initial 200 units at a price of $135,000 each.

The contract included an arbitration clause, which provided that "[a]ll disputes arising out of or relating to this Agreement shall be finally settled by arbitration to be conducted in Los Angeles, California in accordance with the rules of the American Arbitration Association. Judgment upon the award rendered may be entered in any court having jurisdiction."

Paragraph 16 of the contract allowed Valsan to terminate the agreement "for convenience" on 60 days notice. If Valsan terminated within the first 18 months, a "termination schedule" provided that it would have to pay for more than 16 units. A new termination schedule for each succeeding 18-month period would be submitted by Calcor and if the parties could not agree on that schedule, an arbitrator would. ¹

Frequent disputes arose between Valsan and Calcor, resulting in an arbitration and concomitant arbitration award of January 11, 1990 ("first award"). The disputes at issue involved a letter of credit, the obligation to provide security, the delivery rate, price and payment terms for the units and Calcor's obligation to deliver units. As a result of the award, the delivery schedule was lengthened. Valsan had made advance payment of more than $5.6 million, which would be partially credited over time until 200 units were delivered. The unit price was raised to $195,651 because of design changes. The termination schedule would remain the same but "shall be equitably adjusted for any change in the unit price ... or in the delivery schedule." Valsan was deemed to be the owner of tooling used by Calcor to manufacture the units and Calcor was to provide a Uniform Commercial Code ("UCC")-1 financing statement to secure Valsan's interest in that equipment. Finally, the award stated that "[t]he contract continues in effect in accordance with its terms as construed hereby."

The first award was confirmed by the court and judgment was entered pursuant to its terms on April 26, 1990 ("the first judgment").

More disputes arose, resulting in a second arbitration award dated June 23, 1992 ("second award"). The second award recited at length the performance history of the parties While delivery delays considered in the first award were most likely Calcor's fault, the arbitrator stated that Valsan now needed to suspend deliveries because of market conditions. Though Valsan was still obligated to accept at least two units per month, as per the first award, the second arbitrator ordered that deliveries be suspended until April 1993. Valsan's $5.6 million advance would still be applied as partial credits against future deliveries, as per the first award. Calcor had not yet supplied the required UCC-1 financing statement to secure Valsan's interest in certain tooling and equipment and had to do so. Valsan would pay Calcor $10,000 a month as idle time costs from March 1, 1991, until 60 days before deliveries resumed and would also pay a one-time $100,000 fee to cover shut-down and start-up costs. The paragraph 16 termination schedule was amended to cover the period from July 1992 to December 1993. The arbitrator noted that the contract, as construed by the first award and the second award, would remain in effect.

under the contract and the effect of the first award. The arbitrator did so "because the parties now dispute the meaning of the award" and because they asked him "to review the transcript and the award of the first arbitration and have submitted their disputes as to the first arbitration award for determination in this second arbitration." ²

The second award was confirmed and judgment was entered according to its terms on July 30, 1992 ("the second judgment").

Calcor did not provide the required financing statement and Valsan therefore refused to perform as required by the agreement and the first two awards. Valsan tried to compel a third arbitration, which Calcor sought to abate, arguing that all or part of the second award should be enforced. Valsan countered that it had the right to arbitrate new and different disputes which might affect its duty to perform under the second award. The Hon. Charles C. Lee denied Calcor's motion for the reasons set forth in Valsan's opposition papers and appointed retired Court of Appeal Justice Richard Amerian as a referee to determine what parts, if any, of the second judgment were enforceable and not subject to the matters in dispute under the third arbitration.

Justice Amerian made a third arbitration award on April 20, 1993 ("third award"), finding that: Calcor did not provide the proper assurances for Valsan's security interest until February 13, 1993; and Valsan had "reasonable grounds for insecurity as to the performance of Calcor" which justified its suspension of performance up to that date.

As of February 13, 1993, however, the arbitrator concluded that Valsan was obligated to perform under the judgment entered on the second award but had not, so that Calcor was "entitled to immediate performance of The [second] Judgment...."

On May 7, 1993, Valsan gave Calcor written notice that it was terminating the agreement as per paragraph 16. Based on the monies advanced to Calcor and the previous awards and judgments, Valsan calculated that it was owed $3,000. When Calcor disagreed, Valsan sought to begin yet a fourth arbitration, this time to determine the rights and obligations of the parties upon termination of the agreement, especially with regard to Valsan's $5.6 million advance to Calcor.

Valsan brought a petition to compel arbitration and Calcor opposed it, arguing that Valsan was not entitled to arbitrate the effect and meaning of the judgment entered on the second award. Instead, Calcor was entitled to performance of Valsan's obligations under that judgment, and under the third award, which found that Valsan was obliged to comply with the second award as of February 13, 1993.

Along with its opposition to the petition to compel arbitration, Calcor brought two separate motions of its own: The first to "enforce" the judgment on the second award and the third to confirm the third award and The motions were argued before the Hon. C. Bernard Kaufman on June 23, 1993. Judge Kaufman was concerned that Valsan was asserting a virtually unlimited right to rearbitrate prior awards. While admitting that Valsan had a contractual right to arbitrate the latest dispute, Judge Kaufman denied the petition to compel arbitration without prejudice, subject to Valsan's compliance with all previous arbitration awards and payment of more than $1 million to Calcor. The court granted Calcor's motions to enforce the judgment on the second award and confirm the third award and entered judgment for Calcor in the sum of $1,029,993.92.

enter judgment upon it. As part of these motions, Calcor asked for entry of judgment on the third award in the sum of $1,029,993.92, which represented the idle time payments, shut-down and start up costs, and payments owed on four units which Calcor manufactured pursuant to the second award but which Valsan refused to accept.

This appeal timely followed and Valsan raises the following issues: 1) the court was obligated to grant the petition to compel arbitration; 2) there is no authorized procedure for a trial court to "enforce" a judgment already entered which confirmed an arbitration award; and 3) in confirming the third award, the court was not authorized to enter judgment in any sum, since the third award did not do so. ³

DISCUSSION

1. The Petition To Compel Arbitration Should Have Been Granted

Title 9 of the Code of Civil Procedure (Code Civ.Proc., § 1280 et seq.) is a comprehensive statutory scheme regulating private arbitration. ⁴ Through this detailed scheme, the Legislature has expressed a strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution. As a result, courts will indulge every intendment to give effect to such proceedings. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th1, 9,10Cal.Rptr.2d183,832P.2d899.) "Indeed, more than 70 years ago this court explained: 'The policy of the law in recognizing arbitration agreements and in providing by statute for their enforcement is to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of their differences by a tribunal of their own choosing.' (Utah Const. Co. v. Western Pac. Ry. Co. (1916) 174 Cal. 156, 159 .... 'Typically, those who enter into arbitration agreements expect that their dispute will be resolved without necessity for any contact with the courts.' [Citation.]" (Ibid.)

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