Court Opinion

ID: 9718376
Source: CourtListenerOpinion
Date Created: 2023-08-26 07:22:01.377024+00
Date Added: 2024-06-11T18:23:58.804626
License: Public Domain

Opinion
DRAPER, P. J.
This is an appeal by Oakland Athletics, Division of Charles O. Finley & Co., Inc., from a judgment denying its petition to vacate an arbitration award in favor of James A. Hunter.1
Hunter, a pitcher, contracted to play baseball for the appellant for the 1974 and 1975 seasons. The contract, dated February 11, 1974, required *496payment to the player of $100,000 for each of the two seasons. A “special covenant” included in the agreement provided: “. . . the said Club will pay to any person, firm or corporation designated by said Player, the sum of Fifty Thousand ($50,000.00) Dollars, per year, for the duration of this contract to be deferred compensation, same to be paid during the seasons as earned.” As proposed by Hunter’s attorney, the last line had required the deferred compensation to be paid “at any time requested by said Player,” but at the request of appellant’s president, Charles O. Finley, these words had been stricken, and “during the seasons as earned” had been substituted. Four days after the contract date, Finley wrote to Hunter’s attorney that the club “will be very happy to cooperate in any manner possible to defer any amount of Mr. Hunter’s compensation” and “after you have decided as to how these payments should be made and who they should be made to, kindly advise us and we will cooperate accordingly.”
Hunter’s attorney corresponded with the Internal Revenue Service and ultimately submitted to it an agreement for deferred compensation investment account (DCIA), proposed to be executed by player and club. It provided that the value of that account be “deemed equal to the amount of the account if the deferred compensation had been invested” in annuity contracts with a named life insurance company, half in a fixed annuity contract and half in a variable annuity. This proposed agreement specifically provided “The Employer has the discretion. . . to invest or not invest” and “nothing contained in this agreement shall be construed as requiring such investment.” On July 15, the Internal Revenue Service wrote Hunter, in care of his attorney, that “if payments are made according to its terms .. . the amounts payable under the Agreement will not be includible in gross income until such time as those amounts are paid or otherwise made available ... to you or your beneficiary.” On August 1, Hunter delivered to Finley an agreement in the above form, together with form of application to the named life insurance company for annuity contracts. The agreement and the application for annuity contracts provided that ownership of the annuities was to be vested in the club, and not Hunter.
On August 8, Hunter’s attorney wrote Finley that the papers delivered by Hunter to Finley had not been signed and returned. He demanded prompt action. Some time before August 22, Finley telephoned Hunter’s attorney to say that due to domestic difficulties Finley might be unable to secure the signature of Mrs. Finley, the secretary of the club. The *497attorney wrote Finley, August 22, again seeking signature and return of the papers. On September 4, Finley phoned to inform the attorney that he feared other players might seek what Hunter wanted, that other club owners had urged him not to sign, and that if he did sign he [Finley] would have to pay additional taxes. Following another letter, Finley phoned the attorney on September 15 and, for the first time, stated that he would not sign as requested, nor would he pay the insurer. The attorney asked for a letter to that effect, but Finley refused, saying that he had thrown the papers away. The next day, Hunter’s attorney informed Finley that “we contend . .. you have breached your contract.” and formally demanded signature of the DCIA agreement and payment of $50,000 to the life insurance company. On October 4, general counsel for the Major League Baseball Players Association telegraphed Finley on behalf of Hunter, asserting termination of the contract for breach and for failure to cure the breach within 10 days. On October 17 and 18, the association filed grievances with the club owners’ Player Relations Committee, one seeking to have Hunter declared a “free agent” and the other seeking payment of the $50,000 deferred compensation for the 1974 season.
The arbitration panel sustained the player’s position as to both grievances and made awards accordingly. Appellant club petitioned the superior court for vacation of the award. The petition was denied and the awards affirmed. The club appeals.
It is undisputed that the club agreed to pay Hunter $ 100,000 per season. Of this amount, $50,000 per year was to be “deferred compensation” but was specifically to be paid to player’s designee, “during the seasons as earned.” It is equally undisputed that no part of the deferred compensation was in fact paid, despite demands therefor beginning August 1. As a result, the club enjoyed Hunter’s not insubstantial services for the full 1974 season at a cost of but half the agreed total compensation.
It is quite true that the club’s purchase of annuity contracts in August Avas not required by the DCIA agreement proposed by Hunter’s attorney, and that this inconsistency might result in loss to Hunter of the tax benefit he sought by attempting to defer taxation of his income to years of lesser earnings. But, as the arbitration panel properly found from the documents and the testimony as to negotiations for the basic contract, *498the plan was designed to benefit Hunter, and not the club. Hence its success or failure was a matter for consideration by Hunter only.
Appellant club, however, asserts that its signature of the DCIA agreement and simultaneous payment to the life insurer would be illegal, and would subject the club and Finley to prosecution for aiding or assisting in a false statement in a matter arising under the internal revenue laws (26 U.S.C.A. § 7206). But the club had made no representation that it would comply only with the DCIA agreement, and it would have been a minimal inconvenience, if it executed the documents delivered to it August 1, to disclose to thé Internal Revenue Service both the DCIA agreement and the payments to the life insurer.
Aside from the effect upon appellant, however, it is argued that the award is illegal or against public policy. It must be remembered that we deal here with an arbitration award. Grounds for vacation of an arbitration are strictly limited by statute (Code Civ. Proc., § 1286.2).  Moreover, “erroneous reasoning will not invalidate an otherwise proper award.”  Every intendment of validity must be given the award and doubts must be resolved in its favor. (Grunwald-Marx, Inc. v. L. A. Joint Board, 52 Cal.2d 568, 589 [343 P.2d 23].)
Nonetheless, arbitration awards have been vacated when they are illegal or against public policy. Hence we examine briefly the several types of decisions so holding.  Of course, if the underlying contract which provides for arbitration is itself illegal, no arbitration award may be made under it. (Loving & Evans v. Blick, 33 Cal.2d 603 [204 P.2d 23] [construction contract by unlicensed contractor].) Loving has no application here, since the basic player agreement is concededly valid.  Similarly, if the award commands an act which is unlawful or against public policy, it will be vacated. (Black v. Cutter Laboratories, 43 Cal.2d 788 [278 P.2d 905].) Such authorities have no application here, since the award commands only payment of the unpaid compensation of $50,000.
Appellant, however, seems to argue that the claimed breach consisted only in its refusal to perform acts which would have violated public policy by encouraging tax evasion. He contends that thus, while neither the basic agreement nor the award itself is illegal, the award nonetheless is against public policy. As we have pointed out, both statutory and judicial policy favor finality of arbitration awards.
*499Moreover, courts are reluctant to declare a contract void as against public policy, and will refuse to do so if by any reasonable construction it may be upheld. (Vick v. Patterson, 158 Cal.App.2d 414, 417 [322 P.2d 548].)
Most importantly, appellant’s contention is rejected under a recent Supreme Court holding. (Redke v. Silvertrust, 6 Cal.3d 94 [98 Cal.Rptr. 293, 490 P.2d 805], cert, den., 405 U.S. 1041 [31 L.Ed.2d 583, 92 S.Ct. 1316].) There, an inter vivos trust and agreement between husband and wife for testamentary disposition were attacked as working a fraud upon tax authorities and thus unenforceable. There, as here, there was “nothing illegal per se” in the agreement, for it “could have been carried out in an entirely legal manner had [the husband] disclosed its existence to the tax authorities, or chosen not to claim the . . . deduction.” (P. 102.)  “As a general rule, if a contract can be performed legally, a court will presume that the parties intended a lawful mode of performance” (id.). Absent proof that the parties entered the agreement “with the intent of fraudulently concealing its existence from the tax authorities,” the agreement was valid and enforceable.
In Redke, the surviving husband had in fact claimed and secured the questionable tax deduction.  Here, no tax benefit has been claimed, much less been allowed. The inconsistency of the proposed DCIA and the proposed annuity purchase might have given rise to an inference of intent by Hunter’s attorney to evade taxes, although there was testimony by a qualified tax expert that the proposal was proper. The arbitrators, however, did not draw the inference urged by appellant. The inconsistency could as well have been inferred to arise from confusion or ineptitude of Hunter’s counsel. Moreover, as the arbitrators found, no such issue of illegality was raised by Finley in his objections to signing the two proposed documents. Rather, it was held reasonably inferable that the club refused to comply with Hunter’s request only because Finley belatedly recognized that the language added by him to the basic contract, requiring payment of the deferred compensation “during the seasons as earned” deprived him of the right to retain the funds for use of the club until their actual receipt by Hunter.
Appellant also attacks that portion of the award which declared Hunter a “free agent.” He asserts that application of the “reserve clause” is not subject to arbitration. The argument involves construction of the major league rules, the basic agreement between owners and players *500groups, and the uniform players contract. The issue is discussed at length in a recent decision (Kansas City Royals Baseball Corp. v. Major League Baseball Players Assn. (8th Cir. 1976) 532 F.2d 615). We accept the reasoning and conclusion of that decision, which affirmed an arbitration award comparable to that before us.
Judgment affirmed.
Emerson, J.* concurred.

 The caption of the case “American and National Leagues of Professional Baseball Clubs (Oakland Athletics, Division of Charles O. Finley and Co.. Inc.)" is misleading. The American and National Leagues and their constituent clubs are not a party to this appeal and took no action to vacate the arbitrators’ award. The parties to the petition and appeal are the Oakland Athletics, a Division of Charles O. Finley and Co.. Inc.. petitioner and appellant, and the Major League Baseball Players Association, the sole and exclusive collective bargaining agent for all major league baseball players and for James A. “Catfish” Hunter, a major league baseball player, respondent.

 Retired judge of the superior court sitting under assignment by the Chairman of the Judicial Council.