Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County. No. BS120644 Malcolm H. Mackey, Judge.
Davis & Davis and John D. Wilson for Plaintiff and Appellant.
Jenkins Mulligan & Gabriel, Daniel J. Mulligan and Larry W. Gabriel for Defendants and Appellants.
RUBIN, ACTING P. J.
Commonwealth Land Title Company appeals from the trial court’s judgment confirming the damages portion of an arbitration award against it. Tom Trembley and TMc Wireless, LLC, cross-appeal from the portion of the trial court’s judgment vacating their recovery of attorney fees from the arbitration. We affirm that part of the judgment confirming the damages portion of the arbitration award and reverse that part of the judgment vacating the attorney fee award.
FACTS AND PROCEEDINGS
Tom Trembley agreed to buy a retail cell phone business from Kirk Weiss. In November 2005, Trembley and Weiss entered into an escrow agreement entrusting appellant Commonwealth Land Title Company with the responsibility to act as the sale’s escrow holder. After Trembley and Weiss signed the escrow instructions, Trembley formed a limited liability corporation, respondent TMc Wireless, LLC (TMc), with his business associate, David McDonough, to take ownership of the cell phone business they were about to buy.
The escrow instructions directed Commonwealth to conduct a judgment lien search of Weiss and his cell phone business. Paragraph 11 of the instructions stated: “Escrow Holder is instructed to obtain from any reputable searching company, a Certificate of Information together with County Judgment lien searched on the following Seller name and business name: SELLER: Kirk Weiss BUSINESS NAME: Wireless Express” As later found by the arbitrator, Commonwealth did not conduct a search. After the parties completed the sale and escrow closed, the cell phone business failed. Alleging Commonwealth’s failure to conduct the judgment lien search, which would have uncovered a fraud judgment against Weiss, led to the business’s collapse, Trembley and TMc demanded arbitration under the escrow agreement’s arbitration clause. The clause provided:
“In the event of a claim or controversy between Escrow Holder and any party hereto involving an amount greater than $5,000.00 and arising out of this escrow, either Escrow Holder or such other party may demand arbitration pursuant to the Rules of the American Arbitration Association. The decision of the arbitrator shall be binding on all parties and judgment upon the award of the arbitrator may be entered in any court having jurisdiction thereof.”
Trembley’s arbitration demand sought damages for TMc and himself. Because TMc was not a signatory to the escrow agreement, Commonwealth filed a motion in limine asking the arbitrator to bar Trembley from offering evidence of TMc’s damages. The arbitrator took the motion under consideration, announcing he would defer ruling on it until hearing the arbitration evidence. Following the arbitration hearing, the arbitrator found Commonwealth’s negligent failure to search for judgment liens proximately caused the cell phone business’s collapse. Despite not having expressly ruled on Commonwealth’s motion in limine, the arbitrator issued an interim award of $534,530 in damages to Trembley and TMc. Additionally, the arbitrator found Trembley and TMc were prevailing parties under the escrow agreement’s attorney fee provision. Trembley submitted evidence of his litigation costs and attorney fees, and the arbitrator thereafter issued a final award reiterating the award of $534,530 in damages to Trembley and TMc and awarding them $58,260 in attorney fees and $1,888.84 in costs.
Commonwealth filed a petition in the trial court to correct the arbitration award. The petition asserted the arbitrator exceeded his authority by (1) awarding damages to TMc, which was not a party to the escrow agreement, and (2) awarding attorney fees despite the inapplicability of the escrow agreement’s fee provision. Trembley and TMc opposed Commonwealth’s petition. They asserted the arbitration properly put before the arbitrator the issues of TMc’s being a party to the escrow agreement and the applicability of the escrow agreement’s attorney fee provision, and the arbitrator’s resolution of those issues was not subject to judicial review. The trial court entered judgment confirming the award of damages and litigation costs, but vacating the award of attorney fees. Commonwealth appeals from the trial court’s confirmation of damages to TMc, and Trembley and TMc cross-appeal from the trial court’s vacating of their award for attorney fees.
DISCUSSION
1. Damages to TMc
Trembley, but not TMc, signed the escrow agreement and instructions. The arbitrator nevertheless awarded damages to TMc for Commonwealth’s failure to conduct a judgment lien search leading to the cell phone business’s collapse. Commonwealth contends the arbitrator exceeded his authority by awarding damages to TMc because TMc was not a party to the escrow. Thus, according to Commonwealth, the trial court erred in affirming the damages award for TMc. We disagree.
Trial and appellate court review of arbitration awards is strictly limited:
“To ensure the arbitration decision is final and conclusive, only limited judicial review is available. Courts may not review the merits of the controversy, the validity of the arbitrator’s reasoning, or the sufficiency of the evidence. [Citation.] Indeed, an arbitrator’s decision is not generally reviewable for errors of fact or law, even if the error appears on the face of the award and causes substantial injustice. [Citation.] ‘[A]n award reached by an arbitrator pursuant to a contractual agreement to arbitrate is not subject to judicial review except on the grounds set forth in [Code of Civil Procedure] sections 1286.2 (to vacate) and 1286.6 (for correction).’ [¶] Code of Civil Procedure section 1286.2 sets forth the bases on which a court ‘shall’ vacate an arbitration award. A court shall vacate an award if it determines ‘[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.’ (Id., at subd. (a)(4).) An arbitrator exceeds his powers when[, among other things, he] decides an issue that was not submitted to arbitration [citations], arbitrarily remakes the contract [citation], ... [or] fashions a remedy that is not rationally related to the contract [citation]....” (Jordan v. Department of Motor Vehicles (2002) 100 Cal.App.4th 431, 443 (Jordan).)
Unless an arbitrator’s award violates one of the foregoing restrictions, a court may not overturn an arbitrator’s award involving matters put to the arbitrator, even if the award rests on factual or legal error. As our Supreme Court recently reiterated:
“When parties contract to resolve their disputes by private arbitration, their agreement ordinarily contemplates that the arbitrator will have the power to decide any question of contract interpretation, historical fact or general law necessary, in the arbitrator’s understanding of the case, to reach a decision. [Citations.] Inherent in that power is the possibility the arbitrator may err in deciding some aspect of the case. Arbitrators do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error, for ‘ “[t]he arbitrator’s resolution of these issues is what the parties bargained for in the arbitration agreement.” ’ [Citations.]” (Gueyffier v. Ann Summers, Ltd (2008) 43 Cal.4th 1179, 1184 (Gueyffier).)
An arbitrator holds the power to determine the arbitration’s scope. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 372-373 [“courts should generally defer to an arbitrator’s finding that determination of a particular question is within the scope of his or her contractual authority”].) The arbitration clause here applied to a dispute arising from the escrow “between Escrow Holder [Commonwealth] and any party hereto.” Implicit in that clause’s language is the arbitrator’s power to decide who is a “party” to the agreement. (Ibid; Jordan, supra, 100 Cal.App.4th at pp. 443-444 [courts give “substantial deference to the arbitrator’s own assessment of his contractual authority”].) Here, the parties put to the arbitrator the issue of who was a proper claimant in the arbitration. Trembley and TMc proffered themselves as claimants; Commonwealth’s motion in limine opposed TMc’s right to claim damages. By awarding damages to TMc, the arbitrator implicitly overruled Commonwealth’s motion in limine. As our Supreme Court explained in Moshonov v. Walsh (2000) 22 Cal.4th 771, 775 (Moshonov), “arbitrators do not ‘exceed[ ] their powers’... merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators.” The trial court thus did not err in affirming the damages award to Trembley and TMc. (Accord Jordan, supra, at p. 443 [no error affirming award deciding issue put to arbitrator].)
The decisions Commonwealth cites in support of its contention that the arbitrator exceeded his powers are unavailing. Summit Financial Holding, Ltd. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705, limited an escrow holder’s fiduciary duty to a party to the escrow. (Id. at p. 711.) The decision is inapt, however, because it involved review of a trial court’s judgment, not an arbitrator’s award; an arbitration award is not subject to judicial review for legal error. (Moshonov, supra, 22 Cal.4th at p. 775 [rejected “view that a court may vacate or correct the award because of the arbitrator’s legal or factual error, even an error appearing on the face of the award”].) And Bonshire v. Thompson (1997) 52 Cal.App.4th 803, cited by Commonwealth is distinguishable. The arbitration agreement in that case expressly prohibited consideration of extrinsic evidence. (Id., at pp. 805-806.) The arbitrator thus exceeded his powers when he considered extrinsic evidence. Here, in contrast, the arbitration agreement did not restrict the arbitrator’s power to determine who was a party to the escrow agreement. Whether or not the arbitrator answered that question correctly, his answer is not subject to judicial reversal.
2. Attorney Fees
The arbitrator awarded attorney fees to Trembley and TMc. The trial court concluded the arbitrator exceeded his powers by awarding fees. The court rejected Trembley’s assertion that the arbitrator plausibly interpreted the escrow agreement in awarding fees. Trembley argued to the court: “[The arbitrator] may have been wrong in interpreting the contract, okay? I don’t concede that he is; but even if he was, that’s not an issue which this court can address. It’s a simple contract interpretation. [¶] They submitted this matter to arbitration.” Rejecting Trembley’s argument, the court replied with a rhetorical question manifesting its determination to vacate the arbitrator’s fee award: “The arbitrator can do anything he wants, pull it out, pull anything he wants out, counselor?”
A court’s power to vacate an arbitration award is very limited. (Moshonov, supra, 22 Cal.4th at p. 775.) In Gueyffier, supra, 43 Cal.4th 1179, for example, the trial court vacated an arbitration award that excused on equitable grounds a party’s nonperformance of a contractual term even though the arbitration agreement expressly barred the arbitrator from modifying or changing the contract’s terms. (Gueyffier, at pp. 1184-1185.) The Supreme Court reversed the trial court and reinstated the arbitration award. The Supreme Court explained:
“When parties contract to resolve their disputes by private arbitration, their agreement ordinarily contemplates that the arbitrator will have the power to decide any question of contract interpretation, historical fact or general law necessary, in the arbitrator’s understanding of the case, to reach a decision. [Citations.] Inherent in that power is the possibility the arbitrator may err in deciding some aspect of the case. Arbitrators do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error, for ‘ “[t]he arbitrator’s resolution of these issues is what the parties bargained for in the arbitration agreement.” ’ [Citaitons.]” (Gueyffier, at p. 1184.)
Here, the escrow agreement granted attorney’s fees to Commonwealth if Commonwealth filed an action in interpleader. The fee provision allowed: “In the event Escrow Holder interpleads any funds and/or documents with any court [involving a dispute over disbursement of funds or documents to the parties], Escrow Holder shall be entitled to reimbursement of its reasonable attorneys’ fees and expenses of litigation in connection with such action.” Noting the fee provision’s reference to interpleading, Commonwealth contends the “Escrow Instructions do not contain a provision for attorney’s fees to the prevailing party in an action on the contract.” Thus, according to Commonwealth, the arbitrator exceeded his authority by awarding Trembley and TMc their fees in a non-interpleader action.
The attorney fee provision stated in full: “No notice, demand or change of instruction shall be of any effect in this escrow unless given in writing by all parties affected thereby. In the event a demand for funds and/or documents deposited with Escrow Holder in connection with this escrow is made and which is not concurred in by all parties hereto, Escrow Holder, notwithstanding which party made such demand, may elect to do any of the following: [¶] (i) Take no further action in connection with this escrow and continue to hold such funds and/or documents until receipt of mutual concurring instructions from all parties to this escrow as to the disposition of such funds and/or documents; [¶] (ii) Commence an action in interpleader and obtain an order from the court allowing Escrow Holder to deposit such funds and/or documents with the court, in which case Escrow Holder shall have no further liability or obligations with respect to this escrow; or [¶] (iii) In the event that any party commences an action against any other party with respect to this escrow, deposit such funds and/or documents with the court, in which case Escrow Holder shall have no further liability or obligations with respect to this escrow. [¶] In the event Escrow Holder interpleads any funds and/or documents with any court pursuant to either subparagraphs (ii) or (iii) above, Escrow Holder shall be entitled to reimbursement of its reasonable attorneys’ fees and expenses of litigation in connection with such action.”
Judicial review of an arbitrator’s interpretation of a contract does not ask whether the arbitrator’s interpretation is the best, or even correct, one, but rather whether it exceeded the arbitrator’s powers. Here, the parties put to the arbitrator the question of a fee award. As Moshonov instructs, “arbitrators do not ‘exceed[ ] their powers’... merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators.” (Moshonov, supra, 22 Cal.4th at p. 775; see also Moore v. First Bank of San Luis Obispo (2000) 22 Cal.4th 782, 784 (Moore) [“Where the entitlement of a party to attorney fees under Civil Code section 1717 is within the scope of the issues submitted for binding arbitration, the arbitrators do not ‘exceed[ ] their powers’ [citations], as we have understood that narrow limitation on arbitral finality, by denying the party’s request for fees, even where such a denial order would be reversible legal error if made by a court in civil litigation”].) Because the awarding of fees was among the matters entrusted to the arbitrator, the trial court erred in vacating the award.
Commonwealth’s authorities in support of its contention that the trial court correctly vacated the fee award are inapt. Campbell v. Scripps Bank (2000) 78 Cal.App.4th 1328 (Campbell) involved a trial court’s misinterpretation of an indemnification clause in escrow instructions and misreliance on Civil Code section 1717 to award attorney fees under the indemnification clause. (Id. at pp. 1335-1337.) Commonwealth’s reliance on Campbell ignores the distinction between a trial court’s legal error, which is subject to judicial correction, and an arbitrator’s purported legal error, which because it is not subject to judicial review, is insufficient to vacate an arbitration award. DiMarco v. Chaney (1995) 31 Cal.App.4th 1809, is likewise inapt. There, the arbitration agreement directed the arbitrator “shall” award attorney fees to the prevailing party, leaving no discretion to the arbitrator. (Id. at p. 1812, fn. 1.) The appellate court found the arbitrator exceeded his powers by ignoring the agreement’s unambiguously express command. (Id., at pp. 1811, 1815; see Moore, supra, 22 Cal.4th at pp. 787-788 [DiMarco “award could be corrected to provide fees because ‘having made a finding [that the fee seeker] was the prevailing party, the arbitrator was compelled by the terms of the agreement to award her reasonable attorney fees and costs’ ”].) Here, in contrast, the arbitrator adhered to the agreement’s directive that attorney’s fees “shall” be reimbursed in certain circumstances. (“Escrow Holder shall be entitled to reimbursement of its reasonable attorneys’ fees....”) Commonwealth asserts the arbitrator misinterpreted those circumstances, but case law establishes contractual misinterpretation is at most the arbitrator’s legal error not subject to judicial review.
Because we have no occasion to review the correctness of the arbitrator’s award of attorneys fees, we express no opinion on whether Campbell correctly applied section 1717 to the facts of the case before it.
Trembley and TMc additionally argued to the arbitrator that Civil Code section 1717 entitled them to their attorney’s fees. Section 1717 makes a contract’s one-sided attorney’s fees clause reciprocal and expands it to cover all actions under the contract. (See, e.g., Paul v. Schoellkopf (2005) 128 Cal.App.4th 147, 153 [if contract allows fees for one party, fees available to all parties for entire contract because “parties may not limit recovery of attorney fees to a particular type of claim, such as failure to pay escrow costs”]; Harbor View Hills Community Assn v. Torley (1992) 5 Cal.App.4th 343, 345, 348 [section 1717 prevents party from limiting fee provision to “certain actions or specific provisions of the contract”].) The arbitrator did not cite section 1717 in his fee award, and therefore we do not address that statute in affirming the award, other than to acknowledge this line of authority may have been the basis for the arbitrator’s attorney fee award.
DISPOSITION
That portion of the court’s judgment vacating the attorney fee award is reversed and the court is directed to confirm the award of attorney fees. In all other respects, the judgment is affirmed. Each side to bear its own costs.
WE CONCUR: GRIMES, J., O’CONNELL, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.