Opinion
B226621
08-01-2011
BECKETT CANTLEY et al., Plaintiffs and Respondents, v. JAMES L. WECKER II et al., Defendants and Appellants.
Greenberg Glusker Fields Glaman & Machtinger and Norman H. Levine for Defendants and Appellants. Law Offices of William A. Kerr and William A. Kerr for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. SS019407)
APPEAL from a judgment of the Superior Court of Los Angeles County, Linda K. Lefkowitz, Judge. Affirmed.
Greenberg Glusker Fields Glaman & Machtinger and Norman H. Levine for Defendants and Appellants.
Law Offices of William A. Kerr and William A. Kerr for Plaintiffs and Respondents.
This appeal stems from a buyer's claim for rescission of a real estate purchase agreement. The claim was submitted to arbitration pursuant to a California Association of Realtors' standard-form arbitration agreement. An arbitrator issued an award in favor of the buyer and the trial court entered judgment confirming the award. The seller now appeals. Because "the existence of an error of law apparent on the face of the award that causes substantial injustice does not provide grounds for judicial review," and we see no more than legal error infecting the award, we affirm. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 33 (Moncharsh).)
FACTS
The Arbitration's Subject Matter
In 2002, James L. Wecker II and David Wilson (collectively Wecker) purchased a single family residence at 1716 Queens Court, Los Angeles, located in the Hollywood Hills area north of Sunset Boulevard. In 2007, Wecker listed the Queens Court property for sale. In July 2007, Wecker sold the Queens Court property to Beckett and Kirsten Cantley. The parties executed a California Association of Realtors standard-form written purchase agreement which included an arbitration agreement. The purchase price was $2.45 million. Before escrow closed, Wecker filled out a transfer disclosure statement (TDS), which is required under the residential property transfer disclosure law. (See Civ. Code, § 1102 et seq.) Wecker also filled out a seller's property questionnaire (SPQ), a voluntary disclosure document supplementing his TDS. Where asked in his TDS and SPQ to identify any part of the 1716 Queens Court property "shared in common with adjoining landowners," Wecker wrote "driveway;" where asked to identify "encroachments, easements and similar matters" affecting his interest in the property, Wecker again wrote "driveway."
In 2009, the Cantleys began a landscaping project along the southern boundary line of the 1716 Queens Court property, adjoining the property owned by their neighbor, Ulysses Carter, in a sloped area between the two properties. A discussion ensued regarding the area being landscaped, and, shortly thereafter, both Carter and the Cantleys commissioned surveys. The surveys disclosed that Carter owned the entire area under discussion. More directly relevant to the current matter, the surveys further disclosed that an edge portion of a walkway and set of stairs (a strip of the walkway and stairs roughly 78 feet long and varying in length from 1 foot to 9 feet) leading from the street to the Cantleys' house encroached across the boundary line and rested on land owned by Carter. A diagram of the encroaching portion of the walkway and stairs is attached to the end of this opinion. At some point, Carter offered to sell an 810 square foot rectangular parcel of his land (9 feet by 90 feet) to the Cantleys for $300,000, so that the encroachment of the portion of the walkway and stairs was no longer an encroachment. Later, he wanted the encroachment removed.
The Arbitration
In May 2009, the Cantleys served Wecker with a notice of rescission of their 2007 purchase agreement for the 1716 Queens Court property. In June 2009, the Cantleys submitted a Statement of Claim to Alternative Dispute Resolution Services, Inc. (ADR), seeking arbitration of claims for rescission, restitution, and consequential damages against Wecker. The claim in arbitration alleged three causes of action: fraud based on misrepresentation, fraud based on failure to disclose; and negligent misrepresentation. More specifically, the Cantleys' contended that the Weckers made "unwarranted and untrue representations . . . with no reasonable grounds for believing them to be true." All three causes of action were based on allegations that Wecker made the following false representations of fact to the Cantleys in connection with the parties' purchase agreement: that the sellers were not aware of a survey of the Property; of any encroachments or boundary disputes concerning the Property; of any use of any neighboring property by the sellers; of any claims affecting or relating to title or use of the Property; or of any past or present known material facts or significant items affecting the value or desirability of the Property. Finally, that the representations made by Wecker in the TDS and SPQ were true and correct to the best of his knowledge.
The Cantleys' claim in arbitration also alleged a fourth cause of action for "unilateral mistake" which materially affected the transaction and which induced them to enter the purchase agreement. The fourth cause of action was alleged as an alternative to the Cantley's third cause of action for negligent misrepresentation; because the Arbitrator decided the matter on the basis of negligent misrepresentation, she did not reach the fourth, alternative claim, and it is not an issue in the current appeal.
All three causes of action were further based on allegations that Wecker failed to disclose to the Cantleys the existence or contents of the survey obtained by Wecker in 2003; the existence, location and nature of the encroachments; and that the existing landscaping irrigation lines, plumbing, drainage and sprinklers installed and/or maintained by Wecker were situated on the neighboring property.
In January 2010, the parties presented evidence and arguments to the Arbitrator, and the Arbitrator took the matter under submission. As summarized in the Arbitrator's final award, the evidence presented at the arbitration established the following facts:
Frederick Halper purchased the Queens Court property in 1989. When Halper purchased the property, his real estate agent informed him that the landscaped area along the southern boundary of the property was not included in the 1716 Queens Court parcel. At that time, the land was not landscaped, but had been left in its natural state. During the time that Halper owned the 1716 Queens Court property, his next door neighbor to the south, Carter, had incorrectly informed Halper that Carter's property extended across the unimproved area of land only up to a utility pole. Believing that no one owned the unimproved area of land between the pole and the 1716 Queens Court property, and that the area of land was dedicated for a City use that had never materialized, Halper added the encroaching stairs and walkway on the south side of the residence at 1716 Queens Court, and did landscaping (including sprinklers and lighting) on the area of land up to the utility pole. Halper obtained all the necessary permits for his work, and Carter never objected. When Halper added the landscaping, he obtained Carter's consent to extend the landscaping south of the utility pole to cover Carter's adjacent land. Still further south of the utility pole, Carter installed his own irrigation system.
Wecker purchased the 1716 Queens Court property in 2002. He did not obtain a survey prior to purchasing the property. In 2003, Wecker obtained a survey after a neighbor advised him that she had sold several vacant lots to the north to a developer and also granted easement rights to their shared driveway. The 2003 survey disclosed that Wecker did not own the "landscaped area" along the southern boundary of the 1716 Queens Court adjacent to the Carter home on the south. More relevant to the current matter, the survey also showed that Wecker did not own a portion of the land under the stairs and walkway leading from the street to the front entry of the house at 1716 Queens Court. At the time of the 2003 survey, Wecker concluded, based on comments from the surveyor, that the landscaped area and the stairway and walkway encroachments were situated on land that was dedicated to the City of Los Angeles for a public stairway which was never built.
Ulysses Carter, Wecker's neighbor on the south, adjacent to the landscaped area, uninformedly and incorrectly told Wecker that his property line (i.e., Carter's property line) extended across part of the landscaped area, up to a line near a utility pole. The utility pole stood at the street near the curb, between two low walls running in opposite directions north and south from the pole along the street. The wall south of the utility pole matched the Carter house, while the wall north of the pole looked more consistent with the appearance of Wecker's house. If the utility pole had been an accurate marker for the Carter property boundary, Carter appeared to own the land northward from his home to a line crossing about one fourth of the way into the landscaped area between the two residences.
Wecker, knowing the walkway and stairs overlapped the southern boundary line of his 1716 Queens Court property, but believing they encroached on land dedicated for an unrealized City purpose, refinished the walkway and stairs while remodeling the house, and did landscaping work in the landscaped area. Wecker obtained permits for the work, and, in obtaining the permits, filed his 2003 survey and plans with the City. Wecker discussed the landscaping with Carter, who agreed to have the same newly planted meadow grass extend across his portion (as he then believed he owned only a portion) of the landscaped area.
In 2009, Carter commissioned a survey which disclosed that he owned the entirety of the landscaped area, as well as land over which a portion of the walkway and stairs to Wecker's house had been built. The 2009 survey did not evidence any land dedicated for use by the City between the Wecker's property and Carter's property. By the time of the arbitration, Carter was demanding that the Cantleys remove their encroaching walkway and stairs.
The Arbitrator's Interim and Final Awards
On March 3, 2010, the Arbitrator issued an "Interim Arbitration Award." The Arbitrator's interim award included the following findings: (1) The Cantleys were interested in the 1716 Queens Court property because of the house and its views; they were "unconcerned with the exact boundaries of the land itself;" (2) Wecker had believed that the landscaped area, and the encroaching stairs and walkway, were located on City-dedicated land, not on Carter's property; (4) Wecker had believed that the City's dormant rights were "innocuous;" (5) Wecker had not viewed the location of the southern property boundary line to be a problem; (6) the "encroaching hardscape" (the stripped portion of the walkway and stairs that crossed over the boundary line) comprised an area approximating "a 702 square foot triangle;" and (7) Wecker did not intend to defraud the Cantleys by hiding negative facts. Based on these findings, the Arbitrator ruled in favor of Wecker on the Cantleys' claims for fraud based on misrepresentation and fraud based on failure to disclose.
The Arbitrator calculated this 702 square foot triangle as follows: "measuring approximately 78' in depth, 9' in width at the street, with a hypotenuse of approximately 10'."
Turning to the Cantleys' negligent misrepresentation claim, the Arbitrator made these findings: (1) Wecker had known that the stairs and walkway encroached over the south property line of 1716 Queens Court; (2) Wecker knew that a 2003 survey which he had commissioned showed the encroachment; and (3) Wecker had "no reasonable basis to conclude that these facts were either immaterial or otherwise known or knowable to the Cantleys." Based on these findings, the Arbitrator ruled that Wecker "negligently misrepresented that there was no survey and that there were no encroachments." We construe this ruling to incorporate the Arbitrator's finding that Wecker, in stating the "driveway" at 1716 Queens Court implicated encroachments and easements, he impliedly made an affirmative representation that there were no other encroachment and easement problems.
The Arbitrator then turned to the issue of remedies. The Arbitrator first ruled that negligent misrepresentation is a form of "fraud" supporting the remedy of rescission in Civil Code section 1689. The Arbitrator then considered whether rescission or damages would be ordered. These were the Arbitrator's stated reasons for deciding to grant the remedy of rescission:
"Rescission is an equitable remedy designed to return the parties to the status quo prior to the purchase of the property. In granting the remedy of rescission, courts are given broad discretion to fashion an equitable result to avoid unjust or harsh results. [Citation.] Section 1692 allows for consequential damages in addition to rescission and for a court to make such other orders 'which justice may require and may otherwise in its judgment adjust the equities between the parties.' 'Rescission is intended to restore the parties as nearly as possible to their former positions' and "to bring about substantial justice by adjusting the equities between the parties' despite the fact that 'the status quo cannot be exactly reproduced."' [Citation.] Where avoidable, a rescinding purchaser should not enjoy an unjust enrichment. [Citation.] However, while '[e]quity is solicitous that the innocent party who rescinds be not made to suffer, [i]t exercises no such solitude for the wrongdoer who has brought about a situation in which one or the other must lose.' [Citation.] 'As consequential damages, rescinding buyers or sellers may recover such items as real estate commissions paid in connection with the sale [citation], escrow expenses [citation], interest on specific sums of money paid to the other party [citation], and attorney fees in appropriate cases. [Citations.]'
"[Wecker argues] that if the Arbitrator enters a judgment [sic] rescinding the transaction [he] should not bear the loss of depreciation in the market value of the property. However, the courts that have addressed this issue have concluded otherwise. Most recently in Sharabianlou v. Karp [(2010) 181 Cal.App.4th 1133], the Court of Appeal for the First District refused in a mutual mistake rescission case to compensate the seller for the depreciation in property value. In Sharabianlou, the buyer sued to rescind a real estate purchase contract because the lender refused financing for a contaminated site. The trial court rescinded the contract finding mutual mistake in that the parties were both unaware of the contamination; it awarded damages to the defendant seller, including an adjustment for depreciation in the value of the property. The court of appeal reversed this award, finding that the depreciation was a result of the discovery of contamination on the site and was not attributable to the buyer. See also, Shirreffs v. Alta Canyada Corp. (1935) 8 Cal.App.2d 742; Goodrich v. Lathrop (1892) 94 Cal.56; Shaffer v. Security Trust & Savings Bank 41 P.2d 948. Cf. Utemark v. Samuel (1953) 118 Cal.App.2d 313 (Innocent plaintiffs were entitled to be restored to their original position, as opposed to the wrongdoer defendants). While the market depreciation was not caused by [Wecker], the courts are clear that as between the two parties, it is the negligent party who shall bear the loss as the innocent rescinding party has the right to be placed back in the status quo ante as if the transaction never occurred. [Citation.]
"The Arbitrator recognizes that this award renders a drastic remedy of rescission, with [Wecker] bearing significant losses attributable . . . to market depreciation. The Arbitrator does not render such a drastic award lightly, but does so only after reaching the unavoidable conclusion that [Wecker], despite numerous opportunities, repeatedly failed to disclose the existence of the 2003 survey and the encroachments. These encroachments unquestionably have a significant and measurable effect on the value of the property as they affect the stairway and walkway between the main entry and the street. [Wecker has only himself] to blame for [his] negligence in failing to make these material disclosures.
"Consequently, [Wecker] must return the entire purchase price of $2,495,000 [sic] . . . to the Cantleys, who shall deed back the Property, free of all liens. Alternatively, the Cantleys shall deed the property over to [Wecker] who shall repay to the Cantleys their down payment of $516,189.07 less the credit of $15,610, and assume the existing mortgage of $1,996,000. . . . Wecker shall also pay to the Cantleys as consequential damages the following:
1. Escrow settlement charges $16,266.29;
2. Mortgage interest $325,597.50;
3. Property taxes $40,010.33;
4. Landscaping $9853.55;
5. Pool $5877.00;
6. Improvements $19,818;
7. Insurance $1214.30.
"Against these consequential damages, [Wecker] shall have a credit for the fair rental value of the home while the Cantleys held title in the amount of $120,000 through July 2008, and $9,000 per month thereafter. . . . Prejudgment interest is not appropriate given that the actual damages are not easily liquidated. . . . The Arbitrator does not otherwise find prejudgment interest equitable given that the [Cantleys] are avoiding the loss of depreciation of the property; this loss avoidance is a windfall to [the Cantleys], albeit unavoidable given the legal precedent that calls for the negligent party to bear this loss. As to the other expenses for maintenance and improvements, the Arbitrator finds [the Cantleys] have failed to establish the added value to the property, and that equity demands that they bear the costs of maintenance while they enjoyed the full use and enjoyment of the property.
"This award is an interim award as [the Cantleys] are also awarded attorneys fees, in an amount to be established by further briefing. [The Cantleys]' brief to be submitted within 30 days of receipt of this Interim Award."
In March 2010, Wecker filed an application to correct the Interim Arbitration Award, advising the Arbitrator that she had miscalculated the extent of the encroachment. Wecker explained that the encroaching stairs and walkway were located on a strip of land (more in the shape of a thin rectangle than a triangle) which averaged 1.5 feet in width along the 78 foot distance, for an area closer to 120 square feet, rather than the 700 square feet noted in the Arbitrator's Interim Arbitration Award. The Cantleys opposed Wecker's application, arguing that the Arbitrator did not have the authority under the arbitration forum's rules to change the decision in her Interim Arbitration Award to grant rescission. The Cantleys cited ADR Rule 26(e) and Landis v. Pinkertons, Inc. (2004) 122 Cal.App.4th 985 (Landis).
On April 15, 2010, the Arbitrator issued her "Arbitration Award." The Award acknowledged the Arbitrator's initial miscalculation regarding the size of the encroachment, and set forth that the correct size of the encroachment was closer to 200 square feet, rather than the 700 square feet stated in the Interim Arbitration Award. The Award further set forth that the value of the land was closer to $40,000, rather than the $140,000 stated in the Interim Arbitration Award. At the same time, the Arbitrator found that the encroaching stairs and walkway were "a material fact and did have a significant and measurable effect on market value."
Addressing the correction of the figures noted above, the Arbitrator stated: "This reflects a correction of the Interim Award where the Arbitrator had miscalculated the size of the encroaching stairways and walkways. While there is a statutory basis allowing this correction, [the] Arbitrator may not otherwise correct an award that she intended on the ground that she later determined a factual or legal error had been made in the award, and may not reconsider the merits of the original award and make a new award under the guise of correction of the award. Landis [, supra, at p. 992]."
The Arbitrator's final Award ordered rescission, and consequential damages of approximately $119,000 plus attorneys' fees and costs of $142,128.36.
The Confirmation Proceedings
On April 26, 2010, the Cantleys filed a petition to confirm the Arbitrator's Award. On May 25, 2010, Wecker responded to the Cantleys' petition to confirm the arbitration award by filing a responsive petition to vacate or correct the Award.
On June 29, 2010, the trial court granted the Cantleys' petition to confirm the final arbitration Award, and denied Wecker's petition to vacate or correct the Award. On July 30, 2010, the court entered judgment confirming the final arbitration Award.
Wecker filed a timely notice of appeal.
In conjunction with his appeal, Wecker filed a petition for writ of superseadas in our court to stay enforcement of the judgment. On August 25, 2010, we denied the petition.
DISCUSSION
The question in the current case is whether the Arbitrator's decision to rescind a $2.45 million real estate transaction, and to award an additional $260,000 in damages, attorneys' fees and costs, based on a 200 square foot encroachment, should be confirmed as an enforceable civil judgment. The trial court ruled it should be confirmed. On appeal, Wecker disagrees. Wecker's arguments on appeal do not persuade us that ground exists for reversing the trial court.
I. The "Evident Miscalculation" Issue
Wecker contends the judgment confirming the final arbitration Award must be reversed because the Arbitrator made an "evident miscalculation" regarding the square footage area of the encroachment in her Interim Arbitration Award, and then further erred in concluding that her authority to change the Interim Arbitration Award only extended to correcting her calculation error. Stated in other words, Wecker argues the Arbitrator had the authority to correct her miscalculation of the square footage area of the encroachment, and that she also had the authority to reconsider her initial decision that rescission was an appropriate remedy, which had been based on her miscalculation. According to Wecker, because the Arbitrator did not correctly understand the extent of her authority, the trial court should have stepped in, and vacated or corrected the Arbitrator's final arbitration Award. We disagree.
It is undisputed that the Arbitrator initially miscalculated the area underlying the encroaching stairs and walkway to be a triangular-shaped area of land measuring roughly 700 square feet in size. It is also undisputed that the area of the encroachment, correctly calculated, is more in the range of a 200 square feet, rectangular-shaped area of land. It is also undisputed that the Arbitrator acknowledged her miscalculation when it was brought to her attention after she issued her Interim Arbitration Award, and that she included the correct calculation (200 square feet) in her final Award. In short, the Arbitrator's final arbitration Award does not, on its face, contain an "evident miscalculation of figures." Hence, the main issue in this case is not what could be done in court with an "evident miscalculation" found in a final arbitration award. Rather, the question is whether a trial court has the power to review the Arbitrator's ruling that she did not have the authority to revisit her initial interim decision to grant rescission, even though it was based to some extent on her initial miscalculation.
The Governing Law
As the parties jointly recognize, the issue presented on appeal is governed by the arbitration statutes, so that is where we begin. Code of Civil Procedure section 1285 provides: "Any party to an arbitration in which an award has been made may petition the court to confirm, correct or vacate the award. . . ." Section 1286 provides: "[T]he court shall confirm the award as made . . . unless in accordance with this chapter it corrects the award and confirms it as corrected, vacates the award or dismisses the proceeding."
All section references are to the Code of Civil Procedure.
Under section 1286.2, subdivision (a)(4), "the court shall vacate the award if the court determines . . . [that the] arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted." (Italics added.) Under section 1286.6, "the court, unless it vacates the award pursuant to Section 1286.2, shall correct the award and confirm it as corrected if the court determines that: [¶] (a) There was an evident miscalculation of figures . . . in the award; [or] (b) The arbitrators exceeded their powers but the award may be corrected without affecting the merits of the decision upon the controversy submitted . . . ." (Italics added.)
The published cases teach that the circumstances under which a court may vacate or correct a final arbitration award on the ground that the arbitrator "exceeded his or her powers" are strictly limited. Most significantly, an arbitrator does not exceed his or her powers when he or she renders a decision that is based on errors of fact or law. (Moncharsh, supra, 3 Cal.4th at p. 11; Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 381 (Intel); and see Gravillis v. Coldwell Banker Residential Brokerage Co. (2010) 182 Cal.App.4th 503, 514.) In a contract-based matter, this means that a court may not vacate an arbitration award merely because the court is unable to find specific terms in the contract authorizing the relief granted. (Intel, supra, 9 Cal.4th at p. 381.) On the contrary, as long as the arbitrator's final award bears "some rational relationship to the contract and the breach," a court will confirm the award. (Ibid.)Moreover, when parties require by an arbitration agreement that a cause of any nature must be determined under certain law, the arbitrator may be said to exceed his or her powers by applying different law, but an award is not subject to challenge on a claim that the arbitrator applied the correct law incorrectly. (See Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1360.) In summary, when parties desire to take themselves out from under the rule that the merits of an arbitration award are not subject to judicial review, the parties must expressly provide in their arbitration agreement that legal errors are an excess of the arbitrator's powers, and are reviewable by a court; such an agreement deprives the arbitrator of the power to commit unreviewable legal error. (Id. at p. 1361.) But, in the absence of such specified limits on the arbitrator's powers, a court shall confirm a final arbitration award unless based on a structural error, for example, the award is based on extrinsic evidence which was not presented to the arbitrator, or the award decides a dispute which was not presented to the arbitrator. (Intel, supra, 9 Cal.4th at pp. 374-375.)
The Arbitrator's Powers
An arbitrator derives his or her powers from the parties' arbitration agreement, including their agreement to the rules which will govern the arbitration. (Intel, supra, 9 Cal.4th at p. 375.) The California Association of Realtors' standard-form real estate purchase agreement between Wecker and the Cantleys included this arbitration clause:
"Buyer and Seller agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction . . . shall be decided by neutral, binding arbitration . . . . The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of residential
real estate Law experience, unless the parties mutually agree to a different arbitrator, who shall render an award in accordance with substantive California Law. The parties shall have the right to discovery in accordance with California Code of Civil Procedure § 1283.05. In all other respects, the arbitration shall be conducted in accordance with [California Code of Civil Procedure §§ 1280-1294.2]. Judgment upon the award of the arbitrator(s) may be entered into any court having jurisdiction. Interpretation of this agreement to arbitrate shall be governed by the Federal Arbitration Act."
On a date not altogether plainly shown in the record, Wecker and the Cantleys agreed to submit their dispute to an arbitrator affiliated with ADR Services, Inc., in Los Angeles. ADR Arbitration Rules, rule 26 govern "The Award" in an ADR arbitration proceeding. Rule 26(a) provides: "The award shall be made promptly by the arbitrator and, unless otherwise agreed by the parties . . . , no later than 30 days from the date of the closing of the hearing . . . . The arbitrator may choose to keep the hearings open to accept post hearing briefs, issue interim awards, or for any other reason.'" (Italics added.) Under Rule 26(c), the arbitrator "is required to render a written, reasoned award enumerating the disposition of each claim and the relief, if any, as to each claim. The Award must be signed by the Arbitrator and served on the parties. . . ."
Rule 26(d) provides: "The arbitrator may grant any remedy or relief that the arbitrator deems just and equitable and within the scope of the agreement of the parties, including, but not limited to, specific performance of a contract[.] In addition to a final award, the arbitrator may make other decisions, including interim, interlocutory, or partial rulings, orders and awards. In any interim, interlocutory, or partial award, the arbitrator may assess and apportion the fees, expenses, and compensation related to such award as the arbitrator determines is appropriate." (Italics added.)
Finally, Rule 26(e) provides: "Within ten (10) calendar days after service of a signed copy of the award, any party may serve upon the other parties and on ADR . . . a request that the arbitrator correct any computational, typographical or other error in an award. The arbitrator may also initiate the process to correct errors in the award. . . . The arbitrator is not empowered to reconsider the merits of any claim already decided. The corrected award shall be served upon the parties in the same manner as the award. The award is considered final, for purposes of a judicial proceeding to enforce, modify or vacate the award, twenty (20) calendar days after service is deemed effective if no request for a correction is made, or as of the effective date of service of a corrected award."
Analysis
Wecker offers a two-staged argument for vacating the arbitration award. First, he argues that, upon the showing that the Arbitrator had miscalculated the extent of the encroachment — a showing which was made before the Arbitrator issued her final award, the Arbitrator had the power to correct her miscalculation, and to rethink her decision to rescind the contract. Second, Wecker argues the Arbitrator's conclusion that she did not have the power to change her decision to rescind the contract is a ground for vacating or correcting the arbitration award under section 1286.4, subdivision (a)(4), because it self-evidences that she "exceeded her powers."
The first stage of Wecker's argument is, in our view, correct. The Arbitrator construed Landis, supra, 122 Cal.App.4th 985, to support the proposition she could "not . . . correct an [interim] award that she intended on the ground that she later determined a factual or legal error had been made in the [interim] award, and may not reconsider the merits of the original award and make a new award under the guise of correction of the award." We find this reading of Landis inaccurate. Landis does not support the proposition that there is a blanket, disempowering prohibition against an arbitrator rethinking an interim decision once made. Landis involved the issue of the statutory constraints upon an arbitrator's power to correct a final arbitration award after it has been issued. (See § 1284.) The current matter involved the issue of revisiting — under the contractual rules governing the arbitration — an interim decision made before a final award was rendered.
The Arbitrator's power with regard to interim decisions and the final award were spelled out in Rule 26. The Arbitrator had the authority to issue interim and interlocutory decisions under Rule 26(a) and 26(d), and to issue a final award under 26(e). In our view, Rule 26 contemplates a difference between nonfinal decisions, and the final award. Rule 26(e) only prohibited changes to a decision by the Arbitrator, after service of the final award; the language prohibiting the reconsideration of "any claim already decided" is found in Rule 26(e) dealing with the final award. These rules make sense; they provide flexibility prior to a final award, and establish a definitive end point for the arbitration, in order that any judicial action on a final award may move forward accordingly. Plainly, the Arbitrator could not change her final award once it had been issued. But we question whether Rule 26 supports the Arbitrator's conclusion that an ADR arbitrator is prohibited by ADR's rules from rethinking an interim or interlocutory decision when the arbitrator is apprised, before the final award, that an interim or interlocutory decision is based on an undisputed miscalculation.
This brings us to the second stage of Wecker's argument. Wecker argues that the Arbitrator's conclusion that she did not have the power to revisit her interim decision to rescind the parties' purchase agreement supports vacating or correcting her award under section 1286.4, subdivision (a)(4), because it shows she "exceeded her powers." Wecker acknowledges that there is no specific California case authority directly on point, but argues that such a rule has been followed in other jurisdictions, under statutory language in the Federal Arbitration Act similar to California's arbitration statutes. For example, in National Post Office v. U.S. Postal Service (6th Cir. 1985) 751 F.2d 834, the court of appeals ruled: "Although it is sometimes said that arbitration awards cannot be upset 'on grounds of erroneous findings of fact,' . . . the reported cases demonstrate that this aphorism is properly applied to an arbitrator's factual determinations based on disputed or ambiguous evidence (i.e., his findings), rather than to clear misstatements of undisputed historical fact. . . . [¶] . . . We agree . . . where the record that was before the arbitrator demonstrates an unambiguous and undisputed mistake of fact and the record demonstrates strong reliance on that mistake by the arbitrator in making his award, it can fairly be said that the arbitrator 'exceeded [his] powers, or so imperfectly executed them' that vacation may be proper. [Citations.]" (Id. at p. 843; see also McIlroy v. Painewebber, Inc. (5th Cir. 1993) 989 F.2d 817, 821 [accord]; and Fogal v. Stature Constr., Inc. (Tex.Ct.App. 2009) 294 S.W.3d 708, 721-722 [accord].)
Wecker has cited a reasonable rule, but California follows a narrower, bright-line rule deferring in favor of the finality of arbitration. Under Moncharsh and Intel, mistakes of fact or law do not constitute "exceeding powers" within the meaning of section 1282.6, subdivision (a)(4). Wecker argues that the rule we apply makes the Arbitrator's act of correcting her miscalculation regarding the extent of the encroachment, but leaving her initial rescission decision in place, an "empty and useless act." Wecker may be correct, but the Arbitrator's final Award, though infected with an error in the path to its end, was "rationally related" to the parties' contract, and, for that reason, the Arbitrator did not "exceed her powers." (Intel, supra, 9 Cal.4th at p. 381.)
II. Necessary Issues
Wecker contends the judgment confirming the final arbitration Award must be reversed because the arbitrator failed to resolve "necessary issues." We disagree.
Under section 1283.4, an arbitrator's final award "shall include a determination of all the questions submitted to the arbitrator[] the decision of which is necessary in order to determine the controversy." Wecker contends that the Arbitrator did not decide certain elements of the Cantleys' claim for negligent misrepresentation or certain defenses interposed by Wecker. For the reasons explained below, we find Wecker's argument to be a reframed claim that the Arbitrator's final Award is infected with faulty legal reasoning and/or is not supported by sufficient evidence, and, for this reason, we reject Wecker's claim that the Arbitrator's Award exceeded her powers.
Reliance
Wecker is correct that, in the context of the Cantleys' cause of action for negligent misrepresentation, a necessary element of proof was showing that the Cantleys would not have purchased the 1716 Queens Court property had Wecker disclosed that the stairs and walkway leading to the entrance of the property's residence encroached across the south boundary line of the property. (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.) In short, Wecker argues the Cantleys needed to prove reliance, and that the Arbitrator's Award must be vacated or corrected because she never expressly found reliance. The Cantleys respond that the Arbitrator found the encroachment to be a "material" problem, and that this finding incorporates a finding of reliance.
Regardless of whether Wecker or the Cantleys have presented the best legal argument, the problem remains for Wecker that the lack, if any, of an express finding by the Arbitrator on the element of reliance is a factual and/or legal error for which he has no judicial remedy. In other words, assuming that the Arbitrator issued an award without the Cantleys having proved all of the elements of their cause of action, that is not a ground for vacating or correcting the award. (Intel, supra, 9 Cal.4th at p. 381.) Wecker's reliance on City of Oakland v. United Public Employees (1986) 179 Cal.App.3d 356, for a different result is misplaced. The City of Oakland decision predates Moncharsh and Intel, and, in our view, its analysis of what types of omissions will support undoing an arbitration award cannot withstand scrutiny in light of the more recent rules articulated in Moncharsh and Intel.
Section 1283.4 prescribes the form and content of an arbitrator's award; it does not concern an arbitrator's powers. An arbitrator is not required to make express findings on each elemental issue in a case. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 107; Sapp v. Barenfeld (1949) 34 Cal.2d 515, 522 (Sapp).) An arbitrator may impliedly reject a claim that a party might successfully have asserted in a judicial action. (Moncharsh, supra, 3 Cal.4th at pp. 10-11.) An arbitrator's award is sufficient where it serves to settle each controversy between the parties in whole. (Sapp, supra, 34 Cal.2d at p. 523.) The Arbitrator here decided the negligent misrepresentation claim submitted to her.
Prescription
For the reasons akin to those explained above, we also reject Wecker's argument that the trial court should have vacated or corrected the Arbitrator's Award because she did not resolve his claim that the Cantleys would have been successful had they tried to obtain prescriptive rights as against the neighbor, Carter. If there is an error, it is one of law and/or fact, and is not subject to judicial review. We further find that Wecker's argument is problematic because no decision by the Arbitrator regarding prescriptive rights would have had any binding effect on Carter.
III. The Arbitrator's Powers Regarding the Merits and the Remedy
Wecker contends the judgment confirming the arbitration Award must be reversed because the arbitrator exceeded her powers in ruling that he was liable for negligent misrepresentation, and by basing the award on a remedy "not permitted by law." We disagree.
The Merits
Wecker first contends that the Arbitrator's Award "is based on a claim not within the scope of the submission." (Citing Cable Connection, Inc. v. DIRECTV, Inc., supra, 44 Cal.4th at p. 1370, dis. opn. by J. Moreno.) More specifically, Wecker argues that the Arbitrator decided the dispute between the parties under simple negligence principles, where no claim for simple negligence was alleged in the Cantleys' arbitration claim. In a complimentary line of attack, Wecker argues the Arbitrator found that Wecker's negligence arose in connection with his making the decision that the encroachment was not an important item to disclose, or, in other words, that Wecker had been negligent in omitting information about the encroachment. This is a fatal defect for any finding of liability, argues Wecker, because liability upon a claim for negligent misrepresentation requires a positive assertion, negligently made, and cannot be based on an omission, negligently unmade.
We disagree with Wecker that the Arbitrator issued an award "based on a claim not within the scope of the submission." The parties submitted a claim for rescission of their purchase contract, and the Arbitrator decided that claim. Wecker's interpretation of "claim submitted" to mean "legal theory submitted" is too narrow, and would negate the hard-line rule that errors of law are not reviewable. To the extent the Arbitrator's finding of liability under the Cantleys' negligent misrepresentation cause of action is infected with error, that does not mean that a different claim, i.e., a claim not within the scope of the submission, was the basis for the Arbitrator's decision.
This brings us to Wecker's argument that the Arbitrator's finding of liability based on the Cantleys' negligent misrepresentation claim must be reversed because the Cantley's did not prove a positive, but negligent, assertion of fact, as opposed to a mere omission. (See, e.g., Residential Capital v. Cal-Western Reconveyance Corp. (2003) 108 Cal.App.4th 807, 827-829; and Byrum v. Brand (1990) 219 Cal.App.3d 926, 940-942.)
Assuming Wecker is correct that the Arbitrator's decision to impose liability for negligent misrepresentation is not supported by evidence establishing all the elements, we do not agree that this requires reversal of the trial court's judgment. The Arbitrator may have gotten the law or facts wrong on the requirements for negligent misrepresentation, but, again, such errors are not a basis for vacating or correcting the Arbitrator's decision. Misconstruing the law of facts on a submitted claim is not the same thing as deciding a claim which was not the subject matter of the arbitration.
DISPOSITION
The judgment is affirmed. The parties are to bear their own costs on appeal.
BIGELOW, P. J. I concur:
GRIMES, J. RUBIN, J., DISSENTING
Judicial review of arbitration awards ordinarily prohibits courts from correcting errors of fact or law in a final arbitration award. (Moncharsh v. Heily & Blasé(1992) 3 Cal.4th 1, 33.) Despite limited judicial review of arbitration awards, a court may vacate or correct an award that exceeds the arbitrator's powers. (Civ. Code., §§ 1286.2, subd. (a)(4), 1286.6, subd. (b); accord 9 U.S.C.A. § 10, subd. (a).) In and of itself, an arbitration award resting on a legal or factual error does not exceed an arbitrator's powers because an arbitrator has the power to reach the wrong result. (Moncharsh at p. 11; Advanced Micro Devices Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 381.) But the arbitrator must reach that wrong result while following lawful rules of the road governing arbitrations. An arbitrator who does not follow those rules exceeds her powers.
For example, an arbitrator must permit counsel to represent a party if the party so desires. (Civ. Code, § 1282.4; see also Hoso Foods, Inc. v. Columbus Club, Inc. (2010) 190 Cal.App.4th 881, 889 [arbitrator exceeded powers by limiting corporate party's choice of representative at arbitration].) An arbitrator may not base an award on extrinsic evidence not presented to the arbitrator. (Bonshire v. Thompson (1997) 52 Cal.App.4th 803, 811.) An arbitrator may not decide issues not covered by the arbitration agreement, and may not grant relief for breach of contract that bears no rational relationship to the contract's terms. (Advanced Micro Devices Inc. v. Intel Corp., supra, 9 Cal.4th at p. 367; Delta Lines, Inc. v. International Brotherhood of Teamsters (1977) 66 Cal.App.3d 960, 966.) And finally, an arbitrator must issue her award in writing. (Civ. Code, § 1283.4; but see Allstate Ins. Co. v. Superior Court (2006) 142 Cal.App.4th 356, 363 ["arbitrator exceeded his powers" by discussing reasons for his award in his written decision when arbitration agreement stated award "shall be issued without a written opinion"].) All of these procedures safeguard an arbitration's soundness and integrity in the proceedings, even if they do not guarantee the right result. (Accord Hoso Foods, Inc. v. Columbus Club, Inc., supra, at p. 888 ["arbitration procedures that interfere with a party's right to a fair hearing are reviewable on appeal"].)
Here, the arbitrator found respondents wanted to buy appellants' house because they liked the house and its view. Located in the Hollywood Hills above world famous Sunset Boulevard, the home's charm and marketable value, like many hillside homes, presumably lay in its placement in the rising and descending slopes and distinctive terrain of those hills. The arbitrator found respondents were not particularly interested in the property's boundaries or the lot's size and shape. Initially, the arbitrator's interim award found respondents received a lot that was about 700 square feet smaller than what they believed they were buying at the time of purchase. In fact, the arbitrator was mistaken and the lot was only about 200 feet smaller, a mistake the arbitrator corrected when she issued her final award. But despite correcting her error about the lot size, the arbitrator concluded she did not have the power to alter the rescission of the sale that she ordered in her interim award.
I agree with the majority that the arbitrator was mistaken in her belief that she lacked power to amend her interim award to modify her rescission order. Landis v. Pinkerton (2004) 122 Cal.App.4th 985, the case cited by the arbitrator, holds only that an arbitrator may not correct a final award. As the majority correctly points out: "Landis does not support the proposition that there is a blanket, disempowering prohibition against an arbitrator rethinking an interim decision once made." (Maj. Opn. at p. 15.) The majority also agrees that the power to correct an interim award is provided for in Rule 26 of the rule of arbitrator ADR Services Inc., rules to which the parties agreed. The arbitrator had the power to correct interim and interlocutory awards under Rules 26(a) and 26(d).
The majority's view is that the arbitrator's mistaken belief that she had no power to change an interim award was merely an error of law that, once incorporated into her final award, became impervious to judicial review. I respectfully disagree with that conclusion because I believe the arbitrator exceeded her powers when she refused to entertain appellants' request that she modify her interim award of rescission. As the examples I cite above of an arbitrator violating the procedural safeguards of arbitration illustrate, an arbitrator exceeds her power when she acts beyond what the arbitration statutes and the parties and their arbitration agreement anticipated and permitted, and did so in way that deprived the parties of the arbitration's structural soundness. I believe that the arbitrator's mistaken refusal to entertain appellants' request that she modify her rescission order constituted a refusal to act that, like a refusal to allow counsel or make a written award, deprived the parties of an essential safeguard protecting the arbitration process, namely a final arbitration award from an arbitrator who employed her considered judgment shaped by her complete and accurate understanding of the facts and law as she best understood them. Stated slightly differently, the parties agreed through the arbitration rules that they had the right to ask the arbitrator to reconsider her interim rulings. When the arbitrator refused to reconsider, she exceeded the powers conferred on her.
The parties' right to receive the benefit of the arbitrator's accurate understanding of the facts -and her power to correct her mistakes before she issues her final award - is especially important in factually complicated cases such as here. Yet, the majority holds the arbitrator committed only unreviewable legal error when she wrongly concluded she was locked into her initial award of rescission despite her knowing she was wrong about the lot size. I, on the other hand, believe the arbitrator's mistaken belief that her hands were tied denied the parties an essential component of arbitration - the arbitrator's fully reasoned judgment - and thus exceeded her powers. (National Post Office v. U.S. Postal Service (6th Cir. 1985) 751 F.2d 834, 843 ["[W]hen the 'fact' underlying an arbitrator's decision is concededly a non-fact and where the parties cannot fairly be charged with the misapprehension, the award cannot stand."].)
I find additional support for my position from the maxim that the law disfavors idle acts. The parties agree the arbitrator appropriately exercised her power to recalculate the disputed parcel's square footage. But permitting the arbitrator to correct the square footage while abiding by her misapprehension that she lacked power to amend the relief she awarded rendered her correction of the square footage an idle act. To what end was the point of getting the footage right? If the parties were interested only in an accurate statement of the property's square footage, an arbitrator's award is not where one would expect them to turn. Rather, the parties called upon the arbitrator to settle their legal dispute, not to resolve a landscaping or surveying quarrel. The reason for caring about the footage was its connection to the parties' legal dispute. The majority acknowledges the appropriateness of the arbitrator correcting her award to make the square footage correct, but then simultaneously prevents that information from being useful for the only thing for which it mattered - resolving the lawsuit between the parties with appropriate relief.
I would remand to permit the arbitrator to reconsider the relief she granted.
RUBIN, J.