Opinion
G043855
10-11-2011
DAVID KOREN, Plaintiff, Cross-defendant and Appellant, v. JOANN PATRICIA CUDDIGAN, Defendant, Cross-complainant and Respondent.
Law Offices of Brian G. Saylin and Brian G. Saylin for Plaintiff, Cross-defendant and Appellant. Dennis R. Delahanty for Defendant, Cross-complainant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 30-2008-00102830)
OPINION
Appeal from a postjudgment order of the Superior Court of Orange County, Jamoa A. Moberly, Judge. Affirmed.
Law Offices of Brian G. Saylin and Brian G. Saylin for Plaintiff, Cross-defendant and Appellant.
Dennis R. Delahanty for Defendant, Cross-complainant and Respondent.
Plaintiff and cross-defendant David Koren appeals from a postjudgment order denying his motions for reconsideration and to vacate a judgment that confirmed a judicial arbitration award. We conclude some of Koren's claims are untimely and, as for the remaining issues, the trial court properly denied relief. Thus, we affirm its order.
FACTS AND PROCEDURAL BACKGROUND
Koren sued defendant and cross-complainant Joann Patricia Cuddigan and Holistic Enterprises LLC (Holistic), stating causes of action for partition of property, breach of contract, breach of fiduciary duty, intentional infliction of emotional distress, and dissolution of a limited liability company. The complaint alleged Koren and Cuddigan were the co-owners of a residence in Santa Ana and the sole members of Holistic, a Washington state limited liability company that sold health care products, which they jointly operated from the Santa Ana residence. According to the complaint, Cuddigan breached Holistic's operating agreement and her fiduciary duties by excluding Koren from the residence, barring his participation in Holistic's operations, and diverting its resources for her personal benefit. Based on these allegations and other purportedly wrongful acts, Koren sought recovery of his interest in the Santa Ana residence, a dissolution and accounting of Holistic, plus compensatory and punitive damages.
Cuddigan answered the complaint and filed a cross-complaint against Koren, seeking damages for breach of Holistic's operating agreement, misappropriation of its funds, breach of fiduciary duty, conversion, and fraud. According to the cross-complaint, Cuddigan had a business selling health care products in her own name. She met Koren, developed a personal relationship with him, and added his name to the business. At Koren's urging, the parties created Holistic and converted their business into a nonprofit church in an effort to avoid paying taxes. In 2007, the Internal Revenue Service (IRS) audited the parties and Holistic, eventually forcing them to pay back taxes and penalties. The cross-complaint sought damages from Koren for allegedly misappropriating company funds, converting company property, using company credit cards for his personal benefit, plus failing in his promises to register Holistic with state authorities and file tax returns.
In December 2008, the parties and their attorneys signed and filed a document entitled "Stipulation and Order for Binding Arbitration." (Bold and some capitalization omitted.) In the stipulation they agreed to submit the claims "to binding arbitration pursuant to [s]ection 1141.12 of the California Code of Civil Procedure and [former] [r]ules 1600-1617 of the California Rules of Court" (now Cal. Rules of Court, rules 3.810 et seq.). Declaring an "intent . . . that the award of the arbitrator shall be final," the stipulation provided "each party waives[] the right to a trial de novo[] after the arbitrator's award has been filed . . . ."
The stipulation identified "[t]he [primary] issues" as "the parties['] respective interest[s] in the real property . . . and their . . . business . . . ." It authorized the arbitrator to "determine the value of the property and the value of the ownership interest of each party in the property," plus give "[e]ach party . . . the right to purchase the interest of the other" or have it sold with the proceeds divided between them. The parties agreed to dissolve Holistic and allowed the arbitrator to "consider issues raised by both parties against the other for improper operation of the business, causing damage and waste to the business, and for unequal participation in the operation of the business" based on Holistic's "operating agreement . . ., other organization documents, the financial records . . . and any other documents he deems appropriate . . . ."
The parties also stipulated to William Hitchcock's appointment as the arbitrator. They acknowledged "Hitchcock is neither an attorney nor a judge," but "has a legal background" and "is intimately familiar with the facts and circumstances of the matters set forth in the complaint and responsive pleadings." Koren and Cuddigan initialed the following paragraph: "The parties further understand and acknowledge that . . . Hitchcock has previously handled affairs for both parties and is intimately familiar with both parties. The parties both acknowledge that this familiarity . . . may pose a conflict for . . . Hitchcock . . . . The parties both agree that despite this knowledge and familiarity with both parties, they will waive any and all conflicts that may exist, and request that . . . Hitchcock act as arbitrator . . . . The parties acknowledge they have discussed these potential conflicts regarding . . . Hitchcock with their attorneys and that they still request . . . Hitchcock act as arbitrator . . . ." The court signed the stipulation, entering it as an order of the court.
On May 4, 2009, Hitchcock filed a final award with the superior court. He submitted a 37-page revised final award on June 8 with a proof of service showing a copy of it had been mailed to the parties. The revised award declared "[e]videntiary hearings were held in sixteen sessions," "parties and witnesses were sworn and testified, and exhibits were introduced and received," Hitchcock "received declarations from and spoke with twenty witnesses for both sides," and reviewed "[f]our boxes of exhibits consisting of approximately 4,200 pages . . . ." In addition, after issuing a partial award, Hitchcock "requested and received from counsel for the respective parties a brief on reserved issues, plus an additional reply brief from [c]ounsel for [p]laintiff . . . ."
The revised final award confirmed two vehicles, numerous items of personal property or their listed value, and a copy of Holistic's customer data base to Koren. Cuddigan received the Santa Ana residence "subject to all encumbrances of record," and a business named Sunstar Organics, Inc. (Underscoring omitted.) The award ordered Holistic dissolved. In addition, it provided "[a]ll monetary findings and awards to the respective parties . . . have been listed in [an] attached [e]xhibit," and "based upon this calculation," directed Cuddigan to receive "a monetary judgment against Koren for one[-]half of the difference between the total of the respective awards[] in the amount of $139,039.79." (Underscoring omitted.)
Cuddigan petitioned to confirm the award. Through counsel, Koren responded by petitioning to vacate the award. As for the Santa Ana residence, Koren argued Hitchcock failed to account for the mortgages encumbering the property, utilized an incorrect valuation date, and misallocated a line of credit. Concerning Holistic, he claimed Hitchcock double-counted a credit in Cuddigan's favor. Based on these claims, Koren argued Hitchcock exceeded his arbitral powers, failed to determine necessary issues, and the award was procured by undue means and violated public policy.
The court held a hearing on competing petitions on October 2, 2009. It granted Cuddigan's petition, denied Koren's petition, and entered a judgment based on the arbitration award the same date. The court's minute order recognized Koren sought "to characterize his challenges in terms of permissible grounds for vacating an award," but found "each of the challenges . . . amounts to a request that the [c]ourt review the [arbitrator's reasoning or analysis."
On April 2, 2010, Koren filed two motions. The first was a motion for reconsideration under Code of Civil Procedure section 1008 based on the existence of new facts and law. The second motion sought an order vacating the judgment under Code of Civil Procedure section 663 or a new trial under Code of Civil Procedure section 657, subdivision 4. These motions relied on the following factual claims: (1) Hitchcock had failed to disclose he had been disbarred for misappropriation of funds, including one incident that resulted in a criminal conviction; (2) Hitchcock failed to comply with rules governing judicial arbitrations, meeting with Koren in only four one-on-one unrecorded sessions without counsel present and not affording him an opportunity to participate in the remaining sessions; (3) Hitchcock failed to inform Koren of his professional relationship with Cuddigan and her attorney, Dennis R. Delahanty; and (4) during the arbitration, Hitchcock had ex parte communications with Delahanty.
As for the purported professional relationship accusations, Koren alleged, "after the commencement of arbitration," Hitchcock acknowledged "he had referred Cuddigan to . . . Delahanty . . . ." Koren also claimed that while attending a March 2010 natural products show he learned of "a newly created company called East Bluff Trading Company," which "had a product base . . . the same as the one created by Cuddigan and myself . . . ." He was "introduced . . . to Nathan Day Montgomery," who he claimed "was employed by Hitchcock in his taxation business" and "a very good . . . friend of Cuddigan's son . . . and a friend of Hitchcock's son as well." East Bluffs business card listed its "address . . . [a]s the same address and suite number [as that] of Hitchcock['s office]." Koren also asserted East Bluffs "website . . . referenced an array of partner products for sale, including many . . . from Sun[s]tar Organics, the newly created business of Cuddigan . . . ."
Cuddigan opposed the motions. She submitted a declaration stating Hitchcock had assisted the parties during their IRS audit and, at that time, informed them of his disbarment. Delahanty also presented a declaration opposing Koren's motions. He denied being Hitchcock's associate and claimed the only "ex parte communication from me to Hitchcock . . . was my e[-]mail to the arbitrator advising him that his formal service of the award was required by statute."
Hitchcock also presented a declaration. He denied knowing about the formation of East Bluff, having an ownership or financial interest in it, or authorizing Montgomery "the use of my office as the [company's] business address . . . ." Hitchcock corroborated Cuddigan's assertion that he informed the parties of his disbarment while assisting them during the IRS audit. The trial court denied Koren's motions.
DISCUSSION
1. Scope of Review
The parties' briefs reflect a misunderstanding about the scope of our review in this appeal. Koren repeats his claim that he established grounds for granting the motion for reconsideration and argues he is also entitled to relief under all six grounds listed in Code of Civil Procedure section 1286.2, subdivision (a). In part, Cuddigan questions Koren's right to appeal and the timeliness of it.
At the time the trial court heard Koren's postjudgment motions, Code of Civil Procedure section 1141.23 declared "[t]he arbitration award shall be in writing, signed by the arbitrator and filed in the court in which the action is pending. If there is no request for a de novo trial and the award is not vacated, the award shall be entered in the judgment book in the amount of the award. Such award shall have the same force and effect as a judgment in any civil action or proceeding, except that it is not subject to appeal and it may not be attacked or set aside except as provided by [Code of Civil Procedure [s]ection[s] 473, 1286.2, or Judicial Council rule."
Cuddigan relies on this statute to argue Koren's appeal "is not properly taken." While "[t]here is no right to appeal from a judgment entered on a judicial arbitration award . . . an appeal does lie from certain postjudgment orders, including . . . an order denying a motion to vacate or set aside the judgment. [Citations.]" (Karamzai v. Digitcom (1996) 51 Cal.App.4th 547, 549-550, fn. omitted.) Here, Koren has appealed from the postjudgment order denying his motions, not the judgment itself.
But under Code of Civil Procedure section 1143.23, the grounds for relief are limited. To effectuate the statute, California Rules of Court, rule 3.828(a) declares "[a] party against whom a judgment is entered under an arbitration award may, within six months after its entry, move to vacate the judgment on the ground that the arbitrator was subject to a disqualification not disclosed before the hearing and of which the arbitrator was then aware, or upon one of the grounds set forth in Code of Civil Procedure sections 473 or 1286.2[, subdivision] (a)(1), (2), or (3), and on no other grounds." In addition, "[t]he motion . . . may be granted only upon clear and convincing evidence that the grounds alleged are true, and that the motion was made as soon as practicable after the moving party learned of the existence of those grounds." (Cal. Rules of Court, rule 3.828(b).)
Based on the foregoing statute and rule, Koren could not move for reconsideration of the judgment based on new or different facts or law. For the same reason, his effort to seek a new trial under Code of Civil Procedure section 657 also lacks merit. Nor can he seek relief under Code of Civil Procedure section 473 because he failed to cite any basis for relief under it. Finally, by court rule Koren cannot seek relief under subdivisions (a)(4), (5), or (6) of Code of Civil Procedure section 1286.2.
Cuddigan suggests the motions were untimely. She is partially correct. The trial court entered judgment on October 2, 2009. Koren filed his motions on April 2, 2010. In light of the rule's use of the phrase "within six months," the filing of the motions on April 2, 2010 sufficed. (Holquin v. Allison (1929) 97 Cal.App. 126, 128-129 [under former statute requiring the filing of a new trial order "within two months after the verdict," where jury returned verdict on January 25, order granting new trial on March 26 untimely]; Shepherd v. Superior Court (1921) 54 Cal.App. 673, 675 [under former statute requiring new trial ruling within three months of a January 3 judgment, "the power of the court to determine the motion expired on . . . April 3d"].)
But, as noted, California Rules of Court, rule 3.828(b) further requires "the motion [be] made as soon as practicable after the moving party learned of the existence of those grounds." Koren's complaints include Hitchcock's failure to comply with procedural requirements for a judicial arbitration and Delahanty's purported ex parte communication with Hitchcock. His effort to seek relief on these grounds is too late.
Koren and his attorney signed the stipulation, which specified the arbitration would be conducted "pursuant to [s]ection 1141.12 of the California Code of Civil Procedure and [former] [r]ules 1600-1617 of the California Rules of Court." (Underscoring omitted.) In his declarations supporting the motions, Koren acknowledged he met with Hitchcock on only four occasions where he "sat in a chair in Hitchcock's . . . office without my attorney, without a court reporter present, and without any recording devices." But the revised final award referred to 16 "[e]videntiary hearings" where "[t]he parties and witnesses were sworn and testified, and exhibits were introduced and received . . . ." Nonetheless, Koren does not allege he objected to the procedures during the arbitration, nor did he mention this issue when seeking to vacate the award before the trial court entered judgment. "To allow [a party] to await the outcome of the hearing before objecting to the manner in which [the case was decided], would countenance the type of '"procedural gamesmanship"' we have condemned . . . ." (Sy First Family Ltd. Partnership v. Cheung (1999) 70 Cal.App.4th 1334, 1343; see also Caro v. Smith (1997) 59 Cal.App.4th 725, 731-732.)
In addition, Koren's declaration acknowledges he learned about the purported ex parte communication between Delahanty and Hitchcock during a June 8, 2009 court hearing. Again, he failed to mention this objection when seeking to vacate the award. Thus, Koren's effort to seek relief on this ground nearly a year after Hitchcock issued his initial award and six months after the trial court entered a judgment based on the final revised award is too late.
Nonetheless, some claims asserted by Koren in his motions are proper grounds for vacating a judgment based on a judicial arbitration award. In part, he argues Hitchcock failed to timely disclose grounds for his disqualification. He also cites Code of Civil Procedure section 1286.2, subdivision (a)(1), (2), and (3), which allow vacation of an arbitration award where there is corruption, fraud or undue means to procure it or corruption of or misconduct by the arbitrator. We review these issues on their merits.
2. Koren's Arbitrator Disqualification Claim
As noted, California Rules of Court, rule 3.828(a) allows a party to challenge a judgment confirming a judicial arbitration award on the ground "the arbitrator was subject to a disqualification not disclosed before the hearing and of which the arbitrator was then aware . . . ." On appeal, Koren repeats his claim Hitchcock did not inform the parties he had been disbarred and this fact, plus the details of the disbarment, constituted grounds for disqualifying him as an arbitrator. Alternatively, Koren argues Hitchcock's nonattorney status rendered him unqualified to serve as an arbitrator.
These claims lack merit. As for the latter ground, contrary to the opening brief, Code of Civil Procedure section 1141.18, subdivision (a) provides "[p]eople who are not attorneys may serve as arbitrators upon the stipulation of the all parties." Here, that is what occurred.
Concerning Hitchcock's disbarment, it is unclear Koren timely asserted this claim. (Cal. Rules of Court, rule 3.828(b).) Koren's declaration supporting his postjudgment motions is vague about when he learned of Hitchcock's disbarment. At one point Koren states he learned of the disbarment "after the arbitration award . . . ." At another point, Koren claims he only received documentation about it from the State Bar in late March 2010.
But even on the merits, the argument fails. While Koren asserts Hitchcock did not disclose his disbarment, Cuddigan's and Hitchcock's declarations contradict this assertion. As noted, to succeed in vacating the judgment confirming the award, Koren needed to establish a ground for relief by "clear and convincing evidence." (Cal. Rules of Court, rule 3.828, (b).) In her minute order, the trial judge expressly found Koren "failed to meet his burden" of establishing Hitchcock did not "disclose a disqualification prior to the hearing." Even in cases presented on conflicting declarations, under the substantial evidence rule "we defer to the factual determinations made by the trial court . . . ." (Shamblin v. Brattain (1988) 44 Cal.3d 474, 479.) Thus, we conclude the record supports a finding Hitchcock did timely inform the parties of his disbarment.
Koren claims Hitchcock failed to give the parties written notice of his disbarment or provide them with details of why he was disbarred. The grounds for disqualification that a court appointed arbitrator must disclose in a judicial arbitration proceeding are contained in Code of Civil Procedure sections 170.1 and 170.6, plus subdivisions (D)(5)(a) and (D)(5)(b) of canon 6 of the California Code of Judicial Ethics. (Code Civ. Proc., § 1141.18, subd. (d); Cal. Rules of Court, rule 3.816(b).) Nothing therein supports Koren's argument. We conclude the trial court did not err in refusing to vacate the judgment on this ground.
3. Koren's Claim of a Relationship Among Cuddigan, Delahanty, and Hitchcock
Koren claims "after the trial court confirmed the award," he "discovered . . . there was a relationship between Hitchcock, Cuddigan[,] and Delahanty far beyond that revealed in the stipulation for arbitration," which Hitchcock had failed to disclose. He argues that if he had known about the relationship, he would have "reject[ed] Hitchcock as an arbitrator." For the same reason, Koren claims he is entitled to relief under Code of Civil Procedure section 1286.2, subdivision (a)(1) and (2).
The factual bases for this argument are Koren's assertions that Hitchcock was an associate of Delahanty, had referred Cuddigan to Delahanty, and also had an "apparent interest in the natural products industry" associated "with Cuddigan's new business . . . ." Koren claims he first discovered this relationship while attending a health products convention in March 2010.
First, as Koren acknowledges, he knew about Hitchcock's prior association with both Cuddigan and himself. In fact, he and Cuddigan initialed a paragraph in their stipulation that provided Hitchcock "has previously handled affairs for both" of them, was "intimately familiar with both" of them, and "that this familiarity . . . may pose a conflict . . . ." "[D]espite this knowledge and familiarity" and, having "discussed these potential conflicts . . . with [his] attorney," he "waive[d] any and all conflicts that may exist . . . ."
Furthermore, there was conflicting evidence presented concerning any undisclosed relationship among Hitchcock, Delahanty, and Cuddigan. Delahanty denied he and Hitchcock were associates. Hitchcock denied being involved in a health products business, including the East Bluff Trading Company. Both he and Cuddigan declared that business was owned by Nathan Montgomery and two others. Hitchcock denied having any ownership or financial interest in East Bluff and claimed Montgomery, his employee, had used his business address without his knowledge or permission.
Based on the foregoing, we conclude the record supports the trial court's rejection of Koren's undisclosed relationship claims concerning Hitchcock, Cuddigan, and Delahanty.
DISPOSITION
The postjudgment order is affirmed. Respondent shall recover her costs on appeal.
RYLAARSDAM, ACTING P. J. WE CONCUR: ARONSON, J. FYBEL, J.