Court Opinion

ID: 9795017
Source: CourtListenerOpinion
Date Created: 2023-08-31 03:16:12.885086+00
Date Added: 2024-06-11T08:22:52.237113
License: Public Domain

CARTER, J.
I dissent. The problem here presented for consideration is whether a recovery should be allowed when a contract was entered into by a duly licensed contractor who subsequently found it necessary to enter into a partnership for financial reasons, the partnership, through no fault of its own, being unable to procure a partnership contractor's license until the completion of the work.
This case presents extenuating circumstances similar to those which prevailed in the cases of Gatti v. Highland Park Builders, Inc., 27 Cal.2d 687 [166 P.2d 265] and Citizens State Bank *618v. Gentry, 20 Cal.App.2d 415 [67 P.2d 364], and a similar result should be reached. In both cases it was held that where there was substantial compliance with the licensing statutes, recovery should be allowed to prevent a manifestly unjust and inequitable result.
The only record before us is a so-called judgment roll consisting of an application by Loving and Evans for Order Confirming Award of Arbitrator, Notice of Motion by Blick to set Aside Award of Arbitrator, Affidavit of Arbitrator, Affidavit of Walter L. Maas, Jr., one of the attorneys for Blick, Affidavit of Roland S. Woodruff, one of the attorneys for Loving and Evans, Order Confirming Award of Arbitrator, and judgment on award of arbitrator. With the exception of the above affidavits, no evidence was offered in the trial court, and the evidence taken before the arbitrator was not introduced at the trial and is not a part of the record in this ease.
In the affidavit of Roland S. Woodruff which was before the trial court at the time it made its order confirming the award of the arbitrator, he states with reference to the proceeding before the arbitrator:
“That at said hearing evidence was introduced that the original contract for the performance of the alteration, remodeling and repair work was executed by J. P. Loving and Frank R. Blick; that at said time J. P. Loving was doing business as an individual and was properly licensed as a general contractor under the laws of the State of California.
“Evidence was further introduced showing the relationship between J. P. Loving and H. D. Evans, when that relationship was commenced, and other facts relating thereto which were relevant to the question of whether or not said persons had complied with, or were required to comply with, the provisions of the Business and Professions Code of the State of California relating to Contractors’ licenses.”
In this state of the record it must be presumed that all evidence necessary to support the judgment was received. We may, therefore, assume any state of fact necessary to support the judgment which is not contrary to the admissions and stipulations of the parties appearing in the record. This is the rule announced by this court in the recent case of Transportation Guarantee Co. v. Jellins, 29 Cal.2d 242 [174 P.2d 625]. At pages 245 and 246, of 29 Cal.2d, the court said: “Contrary to the rule contended for by defendant we must, on this appeal, in determining whether the judgment shall *619be reversed or affirmed, construe all ambiguities in the contracts against defendant and in favor of plaintiff. This is true, if for no other reason, than that on a judgment roll appeal it will be presumed that all evidence necessary to support the findings was received. (Freeman v. Gray-Cowan, Inc., (1933), 219 Cal. 85, 88 [25 P.2d 415].) In accordance with such rule it is to be presumed that evidence was received establishing that the contracts in question, at least insofar as any ambiguous language is concerned, were prepared and formulated by defendant and hence are to be construed against him. (Civ. Code, §1654; Payne v. Nueval (1908), 155 Cal. 46, 50 [99 P. 476].) This rule would prevail as to the ambiguous language, under the circumstances shown here, even though it is asserted in plaintiff’s brief that ‘it is plain from the face of each contract in suit that a stock form of contract was used.’ The admission that a ‘stock form of contract’ prepared by plaintiff was used, does not, on a judgment roll appeal by defendant, require us to assume in favor of reversing the judgment, that any particular clause was formulated by the plaintiff. Obviously, the contract forms were specially filled in to cover the details of the agreement in each case. Such forms, it is entirely possible, and hence, it must be presumed, if necessary to support the judgment, were furnished in blank by plaintiff to defendant and filled in by the latter in respect to the disputed language. In any event, the construction most favorable to sustaining the judgment must be indulged. (2 Cal.Jur. §511, pp. 871-3; id., § 515, pp. 879-81.) It is also a rule of construction that a contract ‘must receive such an interpretation as will make it lawful ... if it can be done without violating the intention of the parties’ (Civ. Code, § 1643), and ‘may be explained by reference to the circumstances under which it was made, and the matters to which it relates’ (Civ. Code, § 1647).” (Emphasis added.)
The majority quote from the affidavit of respondent’s counsel that a stipulation was made before the arbitrator to the effect that “at all times . . . J. P. Loving held a general contractor’s license. . . .; that the firm of Loving and Evans did not hold such a license until after the termination of the job; that H. D. Evans, individually, did not hold such license.” There was added the further statement that this did not constitute an admission that the provisions of the Business and Professions Code had not been complied with, This stipulation subtracts nothing from the rule just set forth. *620As a matter of fact, the italicized portion informs us that the partnership did hold a license at the completion of the work, that evidence as to why they did not hold the license before must have been before the arbitrator when he gave his award. It also puts the case directly within the statement made in the Gatti case {supra) and set forth in the majority opinion: “thereby any matters which might form the basis of legitimate inquiry by the licensing board as a condition precedent to the issuance of an additional partnership or joint venture license to plaintiffs. . . . were necessarily considered, and favorable action taken thereon. ’ ’
This case presents a stronger argument for allowing recovery on the contract than does the Gentry case {supra). In the Gentry ease, the license of the contractor who entered into the contract and who did the actual work was allowed to expire during the performance of the contract. Although a license was taken out in the name of the corporation which was organized by the contractor and which bore his name, the one who did the actual work was not licensed at all times during the performance of the contract as is required by law. In this case, Loving, the one who was actively engaged in the actual construction work, was licensed at all times during the performance of the contract.
The conclusion is therefore inescapable, that the licensing requirements of the statute have been substantially complied with by the respondents and to deny them a recovery would bring about a manifestly unjust, inequitable and unreasonable result. Speaking frankly, I do not appreciate the morality which denies in such cases any rights to the individual whose money or other property has been thus appropriated. The law countenances no such wretched ethics. Its command always is to do justice. To those who dislike injustice and harsh results, the principle enunciated by the majority of this court will cause a justified indignation—that work honestly and faithfully done shall not be compensated because of an overly strict and technical construction of a statute.
It was provided in the contract that any controversy arising between the parties should be submitted to arbitration. After the completion of the work, appellant paid to the respondents the sum of $13,555 but respondents claimed that an additional amount was due. To settle this dispute, the parties entered into a separate “Agreement of Submission to Arbitration” of all their rights and obligations pursuant to sections 1280 and 1293, inclusive, of the Code of Civil Procedure. Under *621this agreement the arbitrator was empowered to hear the evidence, judge and determine the controversy, and “according to the legal right of the parties” render for them a “final award.”
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. The statutory provisions are designed to avoid useless proceedings and to make the practice simple and as speedy as would be consistent with justice. Since it is the policy of the law to favor arbitration, every reasonable intendment will be indulged to give effect to such proceedings. (3 Cal.Jur. 36, § 6; Utah Const. Co. v. Western Pac. Ry. Co., 174 Cal. 156 [162 P. 631].)
The Code of Civil Procedure, section 1281, provides that' two or more persons may submit in writing to arbitration any controversy existing between them at the time of the agreement to submit, which arises out of a contract or the refusal to perform the whole or any part thereof or the violation of any other obligation.
Section 1288 of the Code of Civil Procedure sets forth the exclusive situations in which an award may be set aside upon the application of any party to the arbitration: (a) Where the award was procured by corruption, fraud, or undue means, (b) Where the arbitrators were guilty of misconduct, in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence, pertinent and material to the controversy, or of any other misbehaviors, by which the rights of any party may have been prejudiced, (d) Where the arbitrators have exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award, upon the subject matter submitted, was not made.
The majority, unable to find a provision applicable to the present situation, place the ease within subdivision (d) set forth above, which, it is my understanding, refers to the powers granted them in the agreement to arbitrate. It is further said that the contract was “illegal” and that no arbitration proceeding can give it validity. Whether or not the contract was valid was a mixed question of law and fact. There is ample authority to the effect that in the absence of a provision to the contrary in the arbitration agreement an arbitrator has power to determine questions of law as well as questions of fact. (See 6 C.J.S. Arbitration and Award, §§48, 95, and cases *622there cited.) In New York, the arbitration award has the saíne, status as the verdict of a jury. See Arbitration Law and Decisions, Herman Toeker, page 171 of the Arbitration Journal, volume 6, 1941-1942.
In Dugan v. Phillips, 77 Cal.App. 268 [246 P. 566], it was held that a party is not permitted to speculate upon the action of the arbitrators and then refuse to be bound by an adverse award. To permit a man, capable of contracting, to refuse to be bound by the award of the arbitrator, would be to permit him, with the sanction of the court, to breach his own contract, into which he entered voluntarily.
In Nelson v. Bestform Knitwear Corp., Sup. Ct., Spec. Term, Part I, N.Y.L.J., page 177, it was held that the issue of the validity of the contract may not be raised by a party thereto after participation in the arbitration proceeding and that no one may participate in an arbitration proceeding and then attempt to escape the consequences of a voluntary submission to its jurisdiction. ‘ ‘ Generally, unless there is a contrary provision in the submission, a valid award operates as a merger and bar of all claims and defenses embraced in the submission and award.” (6 C.J.S. § 96; Stockwell v. Equitable F. and M. Ins. Co., 134 Cal.App. 534 [25 P.2d 873].)
The majority opinion states that, “the rules which give finality to the arbitrator’s determination of ordinary questions of fact or of law are inapplicable where the issue of illegality of the entire transaction is raised in a proceeding for the enforcement of the arbitrator's award. When so raised, the issue is one for judicial determination upon the evidence presented to the trial court, and any preliminary determination of legality by the arbitrator, whether in the nature of a determination of a pure question of law or a mixed question of fact and law, should not be held to be binding upon the trial court.” This argument finds no support whatever in the decisions on the subject of arbitration and award. 3 Cal.Jur. §27, p. 67; 6 G.J.S., Arbitration and Award, 94; 6 C.J.S., Arbitration and Award, § 103; 3 Am.Jur. § 130, p. 951. The latter text states the rule as follows:
“The award of arbitrators acting within the scope of their authority determines the rights of the parties as effectually as a judgment secured by regular legal procedure, and is as binding as a judgment until it is regularly set aside or its validity questioned in a proper manner. Their decision on matters of fact and law is conclusive, and all matters in the award are thenceforth res judicata, on the theory that the *623matter has been adjudged by a tribunal which the parties have agreed to make final-—a tribunal of last resort for that controversy. This rule is universally applied with respect to matters actually presented by the parties for the decision of the arbitrators, and it has been held true even in case one of the parties neglects to present portions of his claim, for the reason that the arbitrators proceed pursuant to the contract of the parties and one so contracting who fails to take advantage of his opportunity to present his full case to the arbitrators should be concluded by the award and denied further relief. To hold otherwise, it is said, would defeat the object of arbitration, which is to avoid litigation, and would, instead, encourage resort to the courts. In other jurisdictions, however, the courts refuse to regard an award as conclusive upon matters embraced in the submission but not actually laid before the arbitrators. Nevertheless, an award which professes to cover everything in the submission is conclusive unless it clearly appears or is proven that such matters were not considered in reaching the decision.
“An award, if otherwise sufficient, is conclusive and binding irrespective of the question of whether or not the party in whose favor it is made originally had a legal cause of action with respect to the matters submitted.” (Emphasis added.)
The only reason given in the majority opinion for its statement that the usual rules applying to arbitration proceedings do not apply in a situation such as this, is that the arbitrators “exceeded their powers” (Code Civ. Proc., § 1288(d).) And the case of Hanes v. Coffee, 212 Cal. 777 [300 P. 963] is cited. In this ease, there was no arbitration and no award, and the lease, in which there was a clause providing for arbitration, was invalid. It is not, therefore, in point. In Friedlander v. Stanley Productions, 24 Cal.App.2d 677 [76 P.2d 145], also cited, at page 680 there is found the following statement; ‘ ‘ The instant action was brought upon the contention that the contract of employment had been canceled and terminated. If the contract had been terminated, then the arbitration provision was inoperative.” Again, no arbitration was had, and no award made. In Johnson v. Atkins, 53 Cal.App.2d 430 [127 P.2d 1027], we find this statement: “If, through frustration, the contract was at an end arbitration was not proper under any interpretation of the rules, and it would then become immaterial whether the award was in proper form.
“We may assume without deciding that the contract was one that called for arbitration under the rules of the assoei*624ation, because we prefer to rest the judgment upon the . . . issue whether the contract was terminated by frustration of the commercial venture contemplated by the parties in the execution of the contract, and hence the arbitrators had no jurisdiction to make the award.” And at page 434: “Following the same rule [continued existence of the person or thing], but addressed particularly to appellants’ contention that the frustration of the purpose of the contract left nothing to arbitrate under it, are Hanes v. Coffee, ...” The case of Abraham Lehr, Inc. v. Cortez, 57 Cal.App.2d 973 [135 P.2d 684] holds as "follows: “We conclude . . . that our first cause of action, identical with that found in the Collier & Wallis, Ltd. case, [9 Cal.2d 202 (70 P.2d 171)] presented a controversy ‘arising under this chapter,’ [Lab. Code, § 1647] and that an action upon it may not be maintained because the matters in dispute have not been referred to the Labor Commissioner. Were the necessity for the reference contractual, a termination of the contract might be said to end the necessity, but as it arises from statute, even the termination of the contract does not put an end to the requirement that matters in controversy be first referred to the Labor Commissioner.
“Secondly, we conclude that an action for damages, based on the theory that the contract is no longer operative, does not present a controversy arising under sections 1550-1649 of the Labor Code. If the contention were that by a term of plaintiff’s contract the questions involved had first to be arbitrated, the cases already referred to justify the conclusion that under the facts of the second cause of action, the contract is at an end, as an operative contract, and the arbitration provision would also be ended.”
In Stetson v. Orland Oil Syndicate, Ltd., 42 Cal.App.2d 139 [108 P.2d 463], an oil lease had terminated by its own terms before the action was brought to quiet title. It is said at page 143: “Appellants next claim that, under the provisions of the lease, any question of disputed fact shall be first referred to arbitration and that respondents are therefore without remedy, other than through such procedure, inasmuch as the lease provides that the decision of the arbitrators shall be a condition precedent to any right of action, and that there was no submission to arbitration in the instant ease.” (Emphasis added.) The court held that the ease of Hanes v. Coffee, supra, was controlling.
*625In only one of the cited cases was arbitration actually had, and prior to that time, the contract had been terminated because of commercial frustration. Hence, the facts are not similar to those under consideration here. The contract here had been fully executed by the respondents and all that remained to do was to compensate them for their work and labor.
The general rule with respect to the finality of the award of an arbitrator is stated in 6 Corpus Juris Secundum, Arbitration and Award, section 95 as follows: “As an adjudication or judgment, an award, which is regular on its face and has not heen impeached finally concludes and hinds the parties on the merits of all matters properly within the scope of the award, hoth as to the law and the facts, and the courts will make no inquiry as to whether the determination thereon was right or wrong, for the purpose of interfering with the award, unless there is a statute providing for a court review of an award on the merits, or preventing the award from becoming conclusive before the entry of judgment thereon. The general rule is particularly applicable where the parties have expressly agreed that the award shall be final and conclusive, or that there shall be no appeal therefrom.” This rule finds support in all of the decisions of this court and the District Courts of Appeal in this state which have given consideration to the problem here involved. Utah Construction Co. v. Western Pac. Ry. Co., 174 Cal. 156 [162 P. 631]; Carsley v. Lindsay, 14 Cal. 390; Peach v. Ritchie, 4 Cal. 205; In re Frick & Preston, 130 Cal.App. 290 [19 P.2d 836],
In legal effect, the holding of the majority can result in but one conclusion, and that is, whenever the question of illegality is raised, or can be raised, in any case where the parties desire to submit a controversy to arbitration, and where such question of illegality is a question of fact, or a mixed question of law and fact, the determination of this issue by the arbitrator is a nullity as it must be redetermined by the trial court in the event the losing party desires to have the matter relitigated, and must again, be redetermined by this court in the event that the losing party again loses. This is indeed a backward step in the science of jurisprudence and in the administration of justice, as the law favors the submission of matters to arbitration since it affords an expeditious and inexpensive method for determining disputes and relieves the courts of some of their burdens and consequent congestion arising from the necessity of hearing and determining controversies.
*626Finally, there is no legal basis for the introduction in evidence in the trial court of the affidavits of counsel for the respective parties and the affidavit of the arbitrator which were filed in this case. This conclusion must follow from the settled rule that the award of an arbitrator is conclusive evidence of all matters contained therein and that such an award cannot be impeached or attacked except for fraud or misconduct or unless the error appears on the face of the award. (3 Am.Jur. § 166, p. 980; 6 C.J.S., Arbitration and Award, § 131; Utah Construction Co. v. Western Pac. Ry. Co., supra; Carsley v. Lindsay, supra; Peachy v. Ritchie, supra.) In American Jurisprudence, supra, the rule is stated thus:
“In general, the award is the best evidence of the matters determined by the arbitrators; and in proceedings to enforce it, the award itself is conclusive evidence of all matters therein contained, provided the arbitrators have not exceeded the powers delegated to them by the agreement of submission. The courts regard matters submitted as concluded by the award, and in an action thereon they will not review the merits of the arbitrators’ findings. However, the mere fact that certain persons signed the award is not, in itself, sufficient evidence that they were the persons selected by the parties to decide the controversy.
“Parol evidence, of course, is admissible to establish an oral award or an oral submission; but extrinsic evidence cannot be admitted to alter an award. The award generally speaks for itself, and cannot be altered any more than the verdict of a fury. It is not open to proof of any understanding or meaning of the arbitrators different from that which it carries with it and is warranted by its terms.” (Emphasis added.)
In 6 Corpus Juris Secundum, Arbitration and Award, section 131, the rule is thus stated: Impeachment of award. It is often declared broadly that an arbitrator is not a competent witness to impeach his own award, and that his admissions or declarations are not admissible for that purpose. Hence, an arbitrator is not a competent witness to prove his own fraud or misconduct, or the misconduct of a party involving also the misconduct of the arbitrator; and admissions made by an arbitrator, after the filing of an award, are not competent evidence for that purpose. However, an arbitrator who has refused to join in the award may testify to acts of partiality or misconduct on the part of other arbitrators; and he may testify as to conduct of a party tending to influence his decision. ’ ’
*627It follows from the foregoing authorities that the affidavits presented to the trial court in the case at bar, and on which the majority relies for a reversal of the judgment, were not competent evidence and should not have been considered by the trial court or by this court in determining the finality of the award made by the arbitrator.
While the proposition is not discussed in the majority opinion, it is obvious that under the rule therein announced, appellant will not only defeat recovery by respondents of the sum of $5,739.87 awarded to them by the arbitrator, but may also recover from respondents the sum of $13,555 voluntarily paid by appellant to respondents before the award was made. Miller v. McKinnon, 20 Cal.2d 83 [124 P.2d 34, 140 A.L.R. 570]; Salada Beach Public Utility Dist. v. Anderson, 50 Cal. App.2d 306 [123 P.2d 86]; Miller v. City of Martinez, 28 Cal. App.2d 364 [82 P.2d 519]; County of Shasta v. Moody, 90 Cal.App. 519 [265 P. 1032].
I cannot believe it was the intention of the framers of this statute or of the members of the Legislature who adopted it that it could ever be invoked to perpetrate such an outrageous injustice. Certainly no injury can result to the public from a holding that the provisions of the statute were substantially complied with in this case. It is the public interest and not private gain which should be given paramount consideration in the interpretation and application of statutes of this character.
■ For the foregoing reasons I would affirm the judgment of the trial court.
Schauer, J., concurred.