Opinion ID: 1182211
Heading Depth: 1
Heading Rank: 7

Heading: The Development of Statutory Law before 1927

Text: Around the time the aforementioned cases were decided, the Legislature enacted the Civil Practice Act of 1851 and established the rules governing statutory arbitration. In section 386 of that act, the Legislature specified the grounds on which a court could vacate an arbitrator's award. The Court, on motion, may vacate the award upon either of the following grounds ...: [¶] 1st. That it was procured by corruption or fraud: [¶] 2d. That the arbitrators were guilty of misconduct, or committed gross error in refusing, on cause shown, to postpone the hearing, or in refusing to hear pertinent evidence, or otherwise acted improperly, in a manner by which the rights of the party were prejudiced: [¶] [3d.] That the arbitrators exceeded their powers in making their award; or that they refused, or improperly omitted, to consider a part of the matters submitted to them; or that the award is indefinite, or cannot be performed. (Stats. 1851, Second Sess., tit. X, ch. IV, § 386, pp. 112-113, hereafter section 386 of the Civil Practice Act.) Significantly, there was no express provision permitting judicial review if there was a gross error on the face of the award. Nor was a court permitted to vacate an award if it concluded it lacked intrinsic [legal] correctness, as suggested in Muldrow, supra, 2 Cal. at pages 77-78. This court first considered section 386 of the Civil Practice Act in Peachy et al. v. Ritchie (1854) 4 Cal. 205 (hereafter Peachy ). In that case, the losing party to an arbitration moved to vacate the award, claiming among other things that the arbitrators refused to hear pertinent evidence, and the arbitrators exceeded their powers. ( Id. at p. 206.) The trial court refused to entertain the motion on procedural grounds. ( Id. at p. 207.) Although the grounds asserted in support of the motion to vacate seemed to fall within the then-existing statutory grounds for vacation, this court refused to examine the decision of the court below, finding the asserted grounds to vacate the award wholly insufficient. [¶] Our Statute is but a re-affirmance of the common law, and gives to the parties no higher rights than they might have asserted in a court of equity in case of mistake, fraud or accident. The misconduct, contemplated by the Statute, was intended to apply to improper conduct in fact, such as that of a witness or juror, as contra-distinguished from mere error of judgment. [¶] The whole doctrine of Arbitration was fully reviewed by this Court in the case of Muldrow v. Norris, 2 Cal. 74, in which we decided that we would not disturb the general finding of arbitrators, and that an award could not be set aside except in the cases there mentioned. ( Peachy, supra, 4 Cal. at p. 207, punctuation and capitalization in original.) The Peachy opinion is noteworthy for two reasons. First, it failed to construe strictly the terms of the statute. Thus, although the appellant raised grounds for review that were apparently permitted under section 386 of the Civil Practice Act (i.e., claims that the arbitrator failed to hear pertinent evidence and exceeded his powers), the court declined to invoke those statutory provisions. Instead, it concluded that the new statute was merely an affirmation of the common law and that the statute granted disputants no greater rights than they would have had before its enactment. The court concluded that permitting a litigant to attack an award on the asserted statutory grounds would destroy this mode of adjusting private differences. ( Peachy, supra, 4 Cal. at p. 207.) Second, Peachy reaffirmed the availability of judicial review of arbitration awards as limited in Muldrow, supra, 2 Cal. 74, expressly mentioning mistake, fraud, and accident. Thus, despite the enactment of section 386 of the Civil Practice Act, the availability of judicial review of arbitration awards was still controlled by the common law principles established in earlier cases. ( Peachy, supra, 4 Cal. at p. 207.) The evolution away from an emphasis on the common law, first suggested by the enactment of the Civil Practice Act of 1851, continued in Carsley v. Lindsay (1859) 14 Cal. 390. In that case, partners in the Salamander Iron Works desired to dissolve their partnership and submitted their dispute to an arbitrator, who found in Carsley's favor. When Lindsay successfully moved the trial court to vacate the award, Carsley appealed. In support of the trial court's decision, Lindsay argued, inter alia, that the award was properly vacated because it was contrary to law and evidence. This court rejected that argument, reasoning, we are not aware that an award of an Arbitrator can be impeached on this ground.... An impeachment on this ground was not admissible at common law, and, if it were, our statute, (Practice Act, [§] 385 et seq. ) prescribes other grounds, as those upon which alone the award can be vacated by the District Court upon motion. ( Carsley, supra, at p. 394, first italics in original, second added, citing Muldrow, supra, 2 Cal. 74; Peachy, supra, 4 Cal. 205.) Although Carsley cited Muldrow and its progeny, it is clear the court had subtly shifted its position to place greater reliance on the statutory provisions as the exclusive grounds on which an arbitration award could be vacated. This trend continued when, in 1872, section 386 of the Civil Practice Act was codified without change as Code of Civil Procedure former section 1287. We addressed the new statute in In re Connor (1900) 128 Cal. 279 [60 P. 862]. In that case, Pratt and Connor had a dispute over a promissory note and submitted the controversy to an arbitrator, who found in Connor's favor. Pratt moved to modify the award, and to vacate a portion of it. When the trial court denied his motion, he appealed, claiming witnesses in the hearing below were not sworn. This court affirmed, reasoning, Where controversies are voluntarily submitted to arbitrators who need not be, and frequently are not, learned in the law, it is not contemplated that their awards will be viewed in the light of that strict adherence to legal rules and procedure which is expected in purely judicial trials. ( Id. at pp. 281-282.) After quoting Muldrow, supra, 2 Cal. 74, the Connor court flatly stated:  the only grounds for a motion to vacate or modify an award are specified in sections 1287 and 1288 of the code ; and the grounds for vacating an award (Code Civ. Proc., sec. 1287) include only cases of fraud, corruption, misconduct, `or gross error,'.... These grounds do not include mere ordinary errors nor even faults of judgment. They refer to things that are `gross.' ( In re Connor, supra at p. 282, italics added.) By the time of In re Connor, supra , then, this court had declined to perpetuate Muldrow 's suggestion that courts could indulge in unfettered review of the intrinsic correctness of an arbitrator's decision. Indeed, the opposite was true; courts following the legislative scheme concluded the grounds for vacating an award were exclusively those set forth by statute. The Connor court, however, retained an exception to this general rule. Muldrow 's holding, permitting judicial review of errors spread upon the record affecting a palpable and material point ( Muldrow, supra, 2 Cal. at p. 77), was transmogrified in In re Connor into a rule permitting judicial review of an award if it contained a gross error, although former section 1287 did not specify that ground as a permissible reason to vacate an award. ( In re Connor, supra, 128 Cal. at p. 282.) Thus, although emphasizing the exclusivity of the statutory grounds for vacating an arbitration award, the Connor court retained a vestige of the common law rule that provided more generous judicial oversight. Sixteen years later, this court retreated somewhat from In re Connor, supra, 128 Cal. 279, and apparently returned to the rule developed in earlier cases (most notably Muldrow, supra, 2 Cal. 74, and especially Peachy, supra, 4 Cal. 205), that deemphasized the exclusivity of the statutory grounds for vacating an award. In Utah Const., supra, 174 Cal. 156, a dispute arose between a railroad and a construction company over whether a debt had been discharged. The parties submitted their dispute to an arbitrator, who ruled in the railroad's favor. The construction company moved to vacate the award and appealed when the trial court denied its motion. We affirmed the trial court's decision, citing Muldrow, supra, 2 Cal. 74, and its progeny. The code provisions are in aid of the common-law remedy of arbitration, a reaffirmance thereof, and do not alter its principles. [Citations.] An award made upon an unqualified submission cannot be impeached on the ground that it is contrary to law, unless the error appears on its face and causes substantial injustice. ( Carsley v. Lindsay, [ supra, ] 14 Cal. 390; Morse on Arbitration, 296.) ( Utah Const., supra, 174 Cal. at pp. 160-161.) Although Carsley v. Lindsay, supra, 14 Cal. 390, was cited in support, the basis for this court's apparent resurrection of the common law dominated view of judicial review of arbitration awards is puzzling. As explained, ante, at pages 17-18, Carsley held that an arbitrator's award cannot be impeached merely because it contained an error of law, and that even if it could, section 386 of the Civil Practice Act (then codified verbatim in former section 1287) set forth the exclusive grounds to vacate an award. ( Carsley v. Lindsay, supra at p. 394.) Thus, close scrutiny reveals Carsley does not support the proposition for which it was cited in the Utah Const. opinion. Utah Const. 's citation to Morse, The Law of Arbitration and Award (1872), is similarly unavailing. That treatise states that when parties submit to an arbitrator under a general submission, such award is conclusive as well of the law as the fact; and the court upon the return of such an award will not inquire whether the referees, thus authorized, have decided correctly upon principles of law or not. ( Id. at p. 296, fn. omitted.) As is clear, Morse does not provide support for the conclusion in Utah Const., supra, 174 Cal. 156, that a court can vacate an arbitration award for a legal error appearing on the face of the award causing substantial injustice. By the time this court decided Utah Const., supra, 174 Cal. 156, the law governing judicial review of arbitration awards was in a state of flux. The initial common law view permitting unfettered review of an award's intrinsic correctness, first set forth in Muldrow, supra, 2 Cal. 74, had fallen by the wayside. More importantly, an alternate rule permitting review of an error  or perhaps, a gross error  on the face of the award causing substantial injustice, also begun with Muldrow, waned with the advent of statutes (first in 1851, then in 1872) governing the area, and had also apparently fallen into disfavor ( Carsley v. Lindsay, supra, 14 Cal. 390), although the notion was not completely abandoned. ( In re Connor, supra, 128 Cal. 279.) By 1916, however, that notion had been revived in Utah Const., supra, 174 Cal. 156. Indeed, Utah Const. has been cited in appellate decisions in the last 10 years for this very proposition. (See, e.g., Park Plaza, Ltd. v. Pietz, supra, 193 Cal. App.3d at p. 1420.) After 1927, the limits of judicial review of arbitration awards would evolve still further, this time shaped by additional legislation.