Filed 11/20/15 Valley Hardware v. Souza CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115. 

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

VALLEY HARDWARE, LLC et al.,

Plaintiffs and Respondents,

v.

JOHN SOUZA et al.,

Defendants and Appellants.

 D067076

 (Super. Ct. No. 

 37-2011-00071592-CL-PT-EC)

APPEAL from a judgment of the Superior Court of San Diego County, Eddie C. 

Sturgeon, Judge. Affirmed.

Solomon Grindle Silverman & Wintringer and Thomas L. Grindle, Holly J. Nolan, 

for Defendants and Appellants. 

Bankhead & Howard and Murray M. Bankhead; Karcher Harmes and Kathryn E. 

Karcher, for Plaintiffs and Respondents. 

John Souza and Carolyn Souza, doing business as Double "S" Enterprises 

(collectively Souza), appeal from a judgment entered after the superior court confirmed 

without correction an arbitration award in favor of Valley Hardware, LLC, Jeff Fabian, 
2

Nadine Fabian, and Ralph Peebler (collectively Valley) arising out of disputes under a 

commercial lease. The arbitrator had awarded Valley $61,157 in compensatory damages 

and $166,738.17 in attorney fees and costs with interest. Souza contends: (1) the 

arbitrator showed bias in Valley's favor, disregarded various express provisions of the 

fully integrated lease, improperly admitted parol evidence, and ignored other evidence in 

reaching his decision; and (2) attorney fees and costs were not recoverable under the 

lease, but in any event the fees and costs award is excessive, duplicative, or unsupported 

by the costs statute. Valley responds that Souza's claims are not cognizable in this appeal 

under Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 (Moncharsh) and its progeny, and 

also because, if this court disregards evidence improperly included in the appellate 

record, the claims are without support. We agree Souza's claims are not subject to 

judicial review, and thus affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND1

The Fabians, Peebler and Valley Hardware, LLC are tenants under a commercial 

lease for premises in Ramona, California. The Fabians and Peebler personally 

guaranteed the lease. John and Carolyn Souza are the landlords under the lease. Souza 

owns several commercial properties and has held controlling interests in at least two 

equipment rental companies; Souza showed significant business acumen during the lease 

 

1 We state the facts primarily from the arbitrator's final decision and award; the 

arbitrator's findings are taken as correct without need to examine the record of the 

arbitration hearings. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 

367, fn. 1 (Advanced Micro Devices).) 
3

negotiations and presented a sophisticated lease agreement with provisions designed for 

the landlord's protection. 

Disputes arose between the parties partly over the value of and time to complete 

tenant improvements at the property, which John Souza proposed to do as a licensed 

general contractor. Valley contended Souza breached the lease and the implied covenant 

of good faith and fair dealing, committed fraud as to a material issue in the lease, and 

violated laws applicable to general contractors. Souza contended Valley breached the 

lease and the guarantees, and committed financial elder abuse. Souza also brought a 

claim for unlawful detainer. 

The lease contains an attorney fees clause that provides in part: "28. 

ATTORNEYS' FEES: If either party hereto shall file any action or bring any proceeding 

against the other party arising out of this Lease or for the declaration of any rights 

hereunder, the prevailing party therein shall be entitled to recover from the other party, all 

costs and expenses, including reasonable attorney's fees incurred by the prevailing party 

as determined by the court. . . . SEE ADDENDUM #3 FOR ARBITRATION." (Some 

emphasis omitted.) The lease's arbitration provision, which appears in addendum No. 3 

to the lease, states: "Notwithstanding anything set forth in this Lease, in the event of 

legal disputes relating to this Lease, Tenant and Landlord agree to resolve said legal 

dispute by binding arbitration. Arbitrator shall be mutually approved by both parties and 

costs to be born equally by both parties."

The parties submitted their disputes to binding judicial arbitration, and in June 

2014, the arbitrator issued his final arbitration award. The arbitrator found Souza 
4

allocated costs to the tenant improvements for work not performed and equipment not 

used in their construction, and he included charges that were either totally inappropriate 

or never a part of the agreement with Valley. He found Valley suffered $61,157 in 

damages through the payment of shared tenant improvement costs and lost earnings. The 

arbitrator also found Valley to be the prevailing party and entitled to $166,738.17 in 

attorney fees and costs under paragraph No. 28 of the lease. 

Valley petitioned to confirm the arbitration award and sought other relief to collect 

on the judgment. Souza responded, and sought to vacate and/or correct the award on 

grounds the arbitrator exceeded his authority by making an award contrary to express 

terms of the lease and by awarding excessive attorney fees in disregard of addendum No. 

3 to the lease, as well as unauthorized costs. The superior court confirmed the award in 

its entirety and entered judgment in favor of Valley for $227,895.17 plus interest, as well 

as an additional $2,218.75 for the fees expended on the petition to confirm the award. 

Souza appeals. 

DISCUSSION

I. Judicial Review of Arbitration Awards and Standard of Appellate Review

It is well settled that the scope of judicial review of private, binding arbitration 

awards is extremely narrow. (Moshonov v. Walsh (2000) 22 Cal.4th 771, 775; Advanced 

Micro Devices, supra, 9 Cal.4th at pp. 372-373; Moncharsh, supra, 3 Cal.4th at p. 11.)

Review of a private, binding arbitration award is generally confined to the statutory 
5

grounds set forth in Code of Civil Procedure2 sections 1286.2 and 1286.6. (Moshonov v. 

Walsh, at p. 775.) Under section 1286.2, subdivision (d), the court "shall" vacate the 

award if it determines "[t]he arbitrators exceeded their powers and the award cannot be 

corrected without affecting the merits of the decision upon the controversy submitted."

Under this statute, "courts are authorized to vacate an award if it was (1) procured by 

corruption, fraud, or undue means; (2) issued by corrupt arbitrators; (3) affected by 

prejudicial misconduct on the part of the arbitrators; or (4) in excess of the arbitrators'

powers." (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1344.) 

Section 1286.6, subdivision (b) requires the court to correct the award if it determines 

"[t]he arbitrators exceeded their powers but the award may be corrected without affecting 

the merits of the decision upon the controversy submitted . . . ." In determining whether 

the arbitrators exceeded their powers, courts must give "substantial deference to the 

arbitrators' own assessment of their contractual authority . . . ." (Advanced Micro 

Devices, 9 Cal.4th at p. 373.)

Under these principles, we may not review the merits of the controversy arbitrated, 

the validity of the arbitrator's reasoning or the sufficiency of the evidence supporting the 

arbitration award. (Moncharsh, supra, 3 Cal.4th at p. 11; Pierotti v. Torian (2000) 81 

Cal.App.4th 17, 21, fn. 1, 23; Creative Plastering, Inc. v. Hedley Builders, Inc. (1993) 19 

Cal.App.4th 1662, 1665.) We may not vacate or correct an award because of an 

arbitrator's legal or factual error, even if those errors appear on the face of the award and 

 

2 Statutory references are to the Code of Civil Procedure. 
6

cause substantial injustice to the parties. (Moshonov v. Walsh, supra, 22 Cal.4th at p. 

775; Moncharsh, at pp. 6, 25-28; Pierotti v. Torian, at p. 23.) These rules confirm the 

parties' intentions that the award be final. (Moncharsh, at p. 9; California Faculty Assn. 

v. Superior Court (1998) 63 Cal.App.4th 935, 944.)

Guided by these standards, we narrowly and deferentially review the arbitrator's 

award. (Advanced Micro Devices, supra, 9 Cal.4th at p. 376.) We review de novo the 

propriety of the superior court's judgment confirming the final arbitration award. (Id. at 

p. 376, fn. 9.) That is, we review independently of the trial court the question whether the 

arbitrator exceeded the authority granted him by the parties' agreement to arbitrate. 

(California Faculty Assn. v. Superior Court, supra, 63 Cal.App.4th at p. 945.)

II. Souza's Challenges to the Arbitrator's Damages Award Are Not Reviewable

Without heeding these settled highly deferential standards,3 Souza challenges the 

arbitration award based on claims of arbitrator bias as well as the arbitrator's disregard of 

various provisions of the lease in reaching the compensatory damage awards, the 

arbitrator's erroneous introduction of parol evidence, and the fact the arbitrator assertedly 

ignored evidence that Valley had defaulted on its rental payments. Souza at various 

points asserts that the award is unsupported by "relevant evidence" or that there was no 

evidence of required conditions for Valley's reimbursement of certain costs. Souza 

reargues the factual merits of the case by asserting, among other things, that most of the 

 

3 Souza instead asks us to apply standards of review generally applicable to appeals 

of judgments from a court or jury trial, not an appeal stemming from a judgment 

confirming a private arbitration award.
7

tenant improvements were completed, Valley insisted on several expenses, Valley never 

paid moneys owed to Souza, and Valley owes Souza money for the completed 

improvements. Souza concludes the opening brief by announcing: "The Arbitrator 

simply got this case wrong."

As Valley correctly points out, all of these arguments are attacks on the arbitrator's 

legal and factual reasoning, or the sufficiency of the evidence, which is expressly 

disallowed in this context. The California Supreme Court explained in Moncharsh: 

" '[A]rbitrators, unless specifically required to act in conformity with rules of law, may 

base their decision upon broad principles of justice and equity, and in doing so may 

expressly or impliedly reject a claim that a party might successfully have asserted in a 

judicial action.' " (Moncharsh, supra, 3 Cal.4th at pp. 10-11.) The Moncharsh court 

stated, "[B]oth because it vindicates the intentions of the parties that the award be final, 

and because an arbitrator is not ordinarily constrained to decide according to the rule of 

law, it is the general rule that, 'The merits of the controversy between the parties are not 

subject to judicial review.' [Citations.] More specifically, courts will not review the 

validity of the arbitrator's reasoning. [Citations.] Further, a court may not review the 

sufficiency of the evidence supporting an arbitrator's award." (Id. at p. 11.) In short, as a 

general rule, "an arbitrator's decision cannot be reviewed for errors of fact or law."

(Ibid.)

Such judicial deference extends to the arbitrator's choice of contractual remedies, 

which is more to the point of Souza's challenge. (Advanced Micro Devices, supra, 9 

Cal.4th at p. 376.) "[A]rbitrators, unless expressly restricted by the agreement or the 
8

submission to arbitration, have substantial discretion to determine the scope of their 

contractual authority to fashion remedies, and . . . judicial review of their awards must be 

correspondingly narrow and deferential." (Ibid.) At issue in Advanced Micro Devices

was whether an arbitrator exceeded his power "in awarding a particular item of damages 

or other relief" under a contract. (Id. at p. 377, fn. omitted.) The court fashioned the 

following "properly deferential framework for reviewing an arbitrator's choice of 

remedies[:] Arbitrators are not obliged to read contracts literally, and an award may not 

be vacated merely because the court is unable to find the relief granted was authorized by 

a specific term of the contract. [Citation.] The remedy awarded, however, must bear 

some rational relationship to the contract and the breach. The required link may be to the 

contractual terms as actually interpreted by the arbitrator (if the arbitrator has made that 

interpretation known), to an interpretation implied in the award itself, or to a plausible 

theory of the contract's general subject matter, framework or intent. [Citation.] The 

award must be related in a rational manner to the breach (as expressly or impliedly found 

by the arbitrator). Where the damage is difficult to determine or measure, the arbitrator 

enjoys correspondingly broader discretion to fashion a remedy. [Citation.] [¶] The 

award will be upheld so long as it was even arguably based on the contract; it may be 

vacated only if the reviewing court is compelled to infer the award was based on an 

extrinsic source. [Citations.] In close cases, the arbitrator's decision must stand." (Id. at 

p. 381, fn. omitted; see also San Francisco Housing Authority v. SEIU Local 790 (2010) 

182 Cal.App.4th 933, 944 [" '[T]he fact that an arbitrator arguably misinterpreted a 

contract does not mean that he did not engage in the act of interpreting it. As bears 
9

repeating, 'so far as the arbitrator's decision concerns construction of the contract, the 

courts have no business overruling him because their interpretation of the contract is 

different from his' "].) According to Advanced Micro Devices, an arbitration award "is 

rationally related to the breach if it is aimed at compensating for, or alleviating the effects 

of, the breach." (Id. at p. 381, fn. 12.)4

Surprisingly, Souza in reply asserts that Moncharsh is "entirely distinguishable"

and "has no bearing" on this appeal. Souza attempts to draw a distinction between 

appealing from a judgment under section 1294, subdivision (d) as Souza did, and seeking 

review of an arbitration award under sections 1286.2 and 1286.6. Citing Ashburn v. AIG 

Financial Advisors, Inc. (2015) 234 Cal.App.4th 79, Souza maintains that because Valley 

"chose to have a Judgment entered," that action rendered the judgment reviewable on 

appeal. Ashburn v. AIG Financial Advisors, Inc., supra, 234 Cal.App.4th 79 stands for 

the unremarkable and inapposite proposition that an order granting a petition to compel 

arbitration is not appealable but is reviewable on appeal from a subsequent judgment on 

the award. (Id. at p. 94; see also In re Marriage of Corona (2009) 172 Cal.App.4th 1205, 

1216, fn. 3.) The appellants in Ashburn did not challenge the arbitrator's award; they

 

4 The court in Advanced Micro Devices addressed the contention, similar to Souza's, 

that " '[a]rbitrators may not award a remedy that conflicts with express terms of the 

arbitrated contract.' " (Advanced Micro Devices, supra, 9 Cal.4th at p. 381.) It 

observed: "To the extent this means arbitrators may not award remedies expressly 

forbidden by the arbitration agreement or submission, the point is well taken. How the 

violation of an ' "express and explicit restriction on the arbitrator's power" ' [citation] 

could be considered rationally related to a plausible interpretation of the agreement is 

difficult to see." (Advanced Micro Devices, at pp. 381-382, emphasis added; see also 

Moshonov v. Walsh, supra, 22 Cal.4th at pp. 777-778.)
10

successfully contended that the superior court erred in ordering their claims to arbitration 

in the first place without holding an evidentiary hearing as to whether there was an 

enforceable agreement to arbitrate. (Ashburn, 234 Cal.App.4th at pp. 83, 94-95, 100.)

Souza also argues that the asserted distinction between Souza's appeal and the 

principles expressed in Moncharsh is discussed at length in Mid-Wilshire Assoc. v. 

O'Leary (1992) 7 Cal.App.4th 1450, where the court explained that an aggrieved party 

"may appeal from an order dismissing a petition to confirm, correct or vacate an award"

but "[n]o appeal . . . will lie from an order denying vacation or correction of an arbitration 

award. [Citation.] Such an order may be reviewed upon an appeal from the judgment of 

confirmation." (Id. at p. 1453.)5 Souza argues: "Because Appellants are not appealing 

the Order denying the motion to vacate the Award, but rather appealing the Judgment, 

which confirmed the Award, Appellants' appeal is proper and this Court does have 

jurisdiction." 

There is no question that the superior court's judgment confirming the arbitration 

award is an appealable judgment under section 1294, and that this court has jurisdiction 

to review it. (§ 1294, subd. (d) ["An aggrieved party may appeal from: [¶] . . . [¶] (d) 

A judgment entered pursuant to [Title 9, Arbitration]"].) The point missed by Souza is 

 

5 In Mid-Wilshire Associates v. O'Leary, supra, 7 Cal.App.4th 1450, because there 

was no judgment confirming the award, the court dismissed the appeal in that case from 

orders compelling arbitration and denying a motion to vacate or correct an arbitration 

award. (Id. at p. 1454.) The court concluded it was without power to bestow jurisdiction 

on itself, and also declined to assume jurisdiction by treating the appeal as a petition for 

writ of mandate. (Id. at p. 1455.)
11

that our scope of review of that judgment is strictly limited in the manner described by 

Moncharsh and its progeny. Souza's arguments fail that standard.6

We observe that for the first time on reply, inconsistent with Souza's arguments 

distinguishing Moncharsh, Souza acknowledges that this court cannot review the merits 

of the dispute or the arbitrator's reasoning. Souza argues that because the lease was 

submitted to the trial court, we may review it to decide whether the arbitration award 

"bear[s] some rational relationship to the contract and the alleged breach of contract." 

Though this assertion is correct, we decline to consider it because Souza has not 

demonstrated good cause for raising it for the first time in reply. (Animal Protection and 

Rescue League v. City of San Diego (2015) 237 Cal.App.4th 99, 109, fn. 9.) " 'Obvious 

considerations of fairness in argument demand that the appellant present all of his points 

 

6 Souza does not point to any express contractual restrictions on the arbitrator's 

grant of authority, and the broad arbitration clause reveals none. (See Ajida 

Technologies, Inc. v. Roos Instruments, Inc. (2001) 87 Cal.App.4th 534, 543 [in 

determining whether the arbitrators exceeded the scope of their powers, court looks first 

to the parties' agreement to see whether it placed any limitations on the arbitrators'

authority]; compare, California Faculty Assn. v. Superior Court, supra, 63 Cal.App.4th at 

pp. 946, 953 [agreement reflected that the arbitrator was not empowered to decide or 

redecide whether a particular candidate was worthy of tenure or promotion].) Souza does 

not, and cannot, argue the arbitrator granted remedies expressly forbidden by the 

arbitration agreement as there are no such prohibitions. (Compare O'Flaherty v. Belgum

(2004) 115 Cal.App.4th 1044, 1061 [agreement specified the arbitrator " 'shall not have 

any power . . . to grant any remedy which is either prohibited by the terms of this 

Agreement, or not available in a court of law' "].) Souza does not claim the entire 

contract is illegal or the arbitration provision is illegal. (Moncharsh, supra, 3 Cal.4th at 

p. 31; Adout v. Hekmatjah (2013) 213 Cal.App.4th 21, 33.) The arbitration clause in his 

case does not expressly deprive the arbitrator of the power to commit legal error. 

(Compare Cable Connection, Inc. v. DIRECTV, Inc., supra, 44 Cal.4th at pp. 1341, fn. 3, 

1361.) 
12

in the opening brief. To withhold a point until the closing brief would deprive the 

respondent of his opportunity to answer it or require the effort and delay of an additional 

brief by permission. Hence the rule is that points raised in the reply brief for the first 

time will not be considered, unless good reason is shown for failure to present them 

before.' " (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764.) And in any event, 

Souza's only argument on this point is to say that the judgment is inconsistent with 

express terms of the lease as argued in his opening brief; Souza does not explain why the 

award bears no rational relationship to the contract or his breach. Indeed, Souza denied 

any damages liability in the opening brief. 

III. The Same Limited Review Applies to the Arbitrator's Attorney Fees and Costs Award

Souza contends that if we do not vacate the arbitration award in its entirety, then 

we must vacate or correct the attorney fee award. Specifically Souza argues: (1) 

addendum No. 3 to the lease calls for attorney fees and costs to be borne equally by the 

parties; (2) the attorney fee award is excessive and reflects duplication of effort, such that 

it must be reduced by $47,670.02; and (3) the costs for expert fees and mediation or 

arbitration fees in the amount of $48,449.50 are not recoverable under section 1033.5. 

For these reasons, Souza maintains the arbitrator abused its discretion in awarding the 

fees and costs. In Souza's reply brief, Souza does not clarify these arguments as to the 

attorney fees and costs award; indeed Souza does not address this aspect of the award 

other than to say Souza may properly appeal from, and this court may properly review, 

the judgment. 
13

Souza's arguments suffer from the same flaws as those with respect to the merits 

of the lease dispute. Where an arbitration agreement does "not limit the issues to be 

resolved through arbitration, the issue of [a party's] entitlement to attorney fees and costs, 

[is] subject to determination in arbitration proceedings." (Corona v. Amherst Partners 

(2003) 107 Cal.App.4th 701, 705, citing Moshonov v. Walsh, supra, 22 Cal.4th at p. 775.)

Here, the lease, which broadly submitted all "legal disputes relating to this Lease"

to binding arbitration, contained two attorney fee clauses. Though the lease 

inconsistently specified in addendum No. 3 that the parties were to bear costs equally, it 

provided in paragraph No. 28 that the prevailing party in any "proceeding . . . arising out 

of this Lease or for the declaration of any rights hereunder" would be entitled to recover 

reasonable attorney fees and costs. Those inconsistent provisions certainly provided no 

clear guidance to the arbitrator. But that circumstance does not render the award beyond 

the arbitrator's powers or entitle us to question the arbitrator's interpretation of them. The 

arbitrator construed the provisions and decided that "[t]he reasonable interpretation of the 

provision of Addendum [No.] 3 is that it relates only to the initial payment of arbitration 

costs and lacks the specificity to constitute a prohibition of an award of fees and costs to 

a prevailing party." The arbitrator found addendum No. 3's language was "broad and 

ambiguous and cannot prevail over the clear and specific language of Paragraph [No.] 

28." He based his award of attorney fees and costs on the finding that Valley was the 

prevailing party entitled to attorney fees and costs under paragraph No. 28 of the lease.

"[W]here 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 
14

binding arbitration, the arbitrator has not 'exceeded [his or her] powers' [citations] as we 

have understood that narrow limitation on arbitral finality." (Moshonov v. Walsh, supra,

22 Cal.4th at p. 773.) Conversely, when entitlement to attorney fees and costs is one of 

the contested issues of law and fact submitted to the arbitrator for decision (Moncharsh, 

supra, 3 Cal.4th at p. 28), an arbitrator's finding that a party is entitled to attorney fees 

does not constitute action in excess of the arbitrator's powers, even if the arbitrator made 

a factual or legal error. (Id. at pp. 12, 28; Taylor v. Van-Catlin Const. (2005) 130 

Cal.App.4th 1061, 1067-1068 [reversing trial court's order granting correction of an 

arbitration award to delete the award of attorney fees; "If the arbitrator did indeed 

overlook or misread [case law]—and even if he incorrectly interpreted or applied [a 

statute]—it would have amounted to an error of law, not an act exceeding his powers. 

The award was therefore not subject to judicial review"]; see also Harris v. Sandro 

(2002) 96 Cal.App.4th 1310, 1314-1315; Pierotti v. Torian, supra, 81 Cal.App.4th at pp. 

25-26.) This is true as to the arbitrator's determination of the prevailing party, which is a 

mixed question of law and fact that we have no power to second guess. (Pierotti v. 

Torian, at p. 26.)

Furthermore, unless arbitrators are specifically required to act in conformity with 

rules of law, they " 'may base their decision upon broad principles of justice and equity, 

and in doing so may expressly or impliedly reject a claim that a party might successfully 

have asserted in a judicial action.' " (Moncharsh, supra, 3 Cal.4th at pp. 10-11.) 

Arbitrators " 'are not bound to award on principles of dry law, but may decide on 
15

principles of equity and good conscience, and make their award ex aequo et bono

[according to what is just and good].' " (Id. at p. 11.)

The superior court thus properly confirmed the arbitration award. Given our 

conclusion, we need not reach Valley's waiver arguments, including its claim that Souza 

has relied on documents not before the trial court and improperly designated in the 

appellate record.
16

DISPOSITION

The judgment is affirmed. Valley Hardware, LLC, Jeff Fabian, Nadine Fabian, 

and Ralph Peebler shall recover their costs on appeal.

O'ROURKE, J.

WE CONCUR:

BENKE, Acting P. J.

McINTYRE, J.