Opinion
For Opinion on Hearing, see 72 Cal.Rptr. 880, 446 P.2d 1000. Eddy S. Feldman, Los Angeles, for petitioner and appellant.
Musick, Peeler & Garrett and Edward J. Riordan, Los Angeles, for defendant and respondent.
HUFSTEDLER, Associate Justice.
Factual and Procedural Summary
The dispute arose out of a contract executed on September 18, 1952, between two corporations: Mutual Housing Association, Inc. ('MHA') and Grandview Building Company ('Grandview'), relating to the development of a large parcel of real property in Brentwood. In October 1956, MHA assigned all of its right, title and interest in the 1952 agreement to Mutual Withdrawees, Inc. ('MWI'). Grandview commenced dissolution proceedings in December of 1962, and its assets were distributed to its sole stockholders, Morris and Zuckerman. As part of Grandview's dissolution, its interest in the Brentwood property was conveyed on January 2, 1963, to Morris and Zuckerman, who each received an undivided one-half interest in that property as tenants in common. Morris and Zuckerman each agreed to be personally bound by the 1952 agreement in Grandview's place. MWI gave its consent in writing in January of 1963 to Morris's and Zuckerman's assumption of Grandview's rights and duties under the 1952 agreement.
The 1952 agreement was an elaborate contract drawn by Grandview, in which Grandview, designated as 'Buyer,' undertook among other things to subdivide the parcel and to record not less than twelve lots per calendar year after December 12, 1952, to make payments on the trust deeds encumbering the property, and to make payments to MHA, the 'Seller,' out of sales proceeds on a schedule set forth in the agreement. The clause of the 1952 contract which is central to the dispute which provoked the arbitration is paragraph 11: 'ELEVENTH: If Buyer does not record twelve (12) lots during any calendar year beginning January 1, 1953, Seller at its option at any time thereafter, but before such default is cured, may demand that Buyer put the remaining unrecorded property up for sale, and Buyer hereby agrees, upon receipt of such demand, so to do at such prices as are determined by Seller.'
As of 1955 Grandview stopped subdividing and was in default of the requirement that at least twelve lots per year be recorded. On November 24, 1959, MWI gave written notice to Grandview declaring the default and exercising its rights under paragraph 11 by demanding that Grandview place all of the remaining unrecorded property on the market for sale at a total price of $1,640,000. Grandview acknowledged its default in writing on February 1, 1960, and advised MWI that it had complied with the demand by placing the property on the market. During the next four years several prospective buyers for the property or some part of it had discussions with MWI about the property, and at least some offers were made for it, but none of them ever reached fruition. Zuckerman never made a written offer to buy the entire property for himself at any time.
On February 14, 1964, Dayton Realty Co. ('Dayton'), a corporation wholly owned by Morris and his wife and controlled by Morris, made a written offer to buy the entire parcel for $1,700,000, upon terms spelled out in the offer. On February 18, 1964, MWI wrote Zuckerman and Morris a letter stating that the Dayton offer had been received and had been accepted by MWI. MWI enclosed a copy of the sale agreement between Dayton and MWI, signed by both of them. MWI demanded that Morris and Zuckerman both sign the agreement as successors in interest of Grandview.
Zuckerman replied by letter dated February 28, 1964, in which, among other things, he said: 'I have authorized Mr. Morris to close this deal for his and my benefit. Please draw the agreement of sale accordingly.' Zuckerman enclosed a copy of a letter he wrote to Morris on the same date with his letter to Grandview. In his letter to Morris he said: 'I hereby give consent to your purchasing the Brentwood property for our mutual benefit and On March 5, 1964, an escrow was opened at Title Insurance and Trust Company concerning the proposed agreement, and copies of the escrow documents were mailed to Zuckerman for his signature. By letter dated March 27, 1964, MWI again demanded that Zuckerman sign the proposed agreement and further demanded that he sign the escrow instructions. Morris signed the documents. Zuckerman refused to sign either one.
On April 2, 1964, MWI demanded that the dispute be arbitrated, referring to the clause in the 1952 agreement stating: 'Twenty-first: In the event a dispute arises between the parties hereto, each of them shall select one disinterested person and the two persons so selected shall select a third disinterested person, and the three persons so selected shall be designated as the 'arbitrators.' A decision by the majority of the arbitrators shall be binding and conclusive upon the disputants and either of them may take the necessary legal steps to have such determination given the force and effect of a judgment. * * * If, for any reason, the arbitrators cannot be chosen in accordance with the above provisions, then the dispute or difference shall be arbitrated under the provisions of Part 3, Title IX of the Code of Civil Procedure of the State of California.'
Title IX of the Code of Civil Procedure, §§ 1280-1293, was repealed in 1961 (Cal.Stats.1961, ch. 461, § 1), and the text, as rewritten is now Title 9, §§ 1280-1288.8 of the Code of Civil Procedure1968000249;0025;;LQ;CACPS1288.8;1000298;.
Although the demand for arbitration was initiated under paragraph 21 of the 1952 contract, the controversy was submitted to arbitration pursuant to a written submission agreement, dated August 7, 1964, executed by all of the parties. The submission agreement defined the dispute to be decided by the arbitrators as follows: 'Whether Mr. E. K. Zuckerman, as one of the successors to Grandview Building Co., is required under the terms and conditions of the agreement between Mutual Housing Association, Inc., and Grandview Building Co., dated September 18, 1952, to execute that certain proposed agreement of sale and set forth in a document dated February 14, 1964, entitled 'Agreement of Sale' and other documents necessary or convenient to carry out its terms.'
Three arbitrators were appointed, and the arbitration hearing commenced on August 11, 1963. At the arbitrators' request, MWI and Zuckerman each filed written contentions of fact and law concerning the submitted question at the threshold of the arbitration.
Zuckerman's contentions of fact were as follows: (1) Morris controls Dayton; (2) Zuckerman did not receive notice of the negotiations between Morris and MWI until after the latter had signed the sale contract; (3) Zuckerman was not given an opportunity to make or secure a better offer for the property after Dayton's offer was submitted to MWI; (4) the Dayton-MWI agreement is 'upon terms and conditions, including purchase price, less favorable to the seller's interests as a whole than probably could have been obtained from third persons'; (5) after the Dayton offer, neither MWI nor Morris made any effort to secure a more favorable offer; (6) MWI 'was induced by B. R. Morris to enter the Proposed Agreement upon terms, including price, less favorable to the sellers' interest as [a] whole than could have been obtained from other propective purchasers by reason of B. R. Morris offering and agreeing to special terms and considerations which would benefit MWI at the expense of E. K. Zuckerman.' His contentions of law were: (1) Paragraph 11 of the 1952 agreement is 'ambiguous' because it does not expressly specify the respective rights and duties of the parties after the property MWI submitted three contentions: (1) Zuckerman must sign the sale and escrow agreements 'because the plain language of the [1952] contract gives him no discretion to do otherwise'; (2) a party to a contract is required to act reasonably, and there are no reasonable grounds for Zuckerman's withholding his signature; and (3) Zuckerman is 'quasi-estopped to say that the agreement should not be signed when he is taking the position that he is the buyer under the agreement.'
The parties to the arbitration estimated the time necessary to complete the arbitration as four hours. The arbitration actually consumed the equivalent of more than five days of trial time, resulting in a reporter's transcript consisting of 721 pages. The reporter's transcript of the arbitration hearings was made an exhibit accompanying the petition to vacate the award and is likewise designated as a part of the record on appeal. The exhibits introduced during the course of the hearing consisted of hundreds of documents. Of those documents only those made a part of the record before the trial court are included in the record on appeal.
At the conclusion of the arbitration hearings and in response to request by the arbitrators, extensive briefs were submitted to the arbitrators on behalf of MWI, Zuckerman and Morris.
On October 26, 1964, the arbitrators served on the parties a copy of their award and the arbitrators' opinion.
Disregarding the formal recitations, the award stated: '1. E. K. Zuckerman, as one of the succesors to Grandview Building Co., is required under the terms and conditions of the agreement between Mutual Housing Association, Inc. and Grandview Building Co. dated September 18, 1952 (Exhibit M-1), to execute that certain proposed agreement of sale set forth in an agreement dated February 14, 1964 (Exhibit M-3), and other documents necessary or convenient to carry out its terms on the following conditions: A. That B. R. Morris, Dayton Realty Co. and Mutual Withdrawees, Inc. modify said Agreement of Sale dated February 14, 1964, (Exhibit M-3) so as to provide for the sale of the real property described therein to E. K. Zuckerman and Dayton Realty Co., as tenants in common, each as to an undivided one-half interest. B. That the distribution of the proceeds of the sale including the rights under any promissory note or deed of trust or other security documents shall be computed according to the terms set forth in the agreement dated September 18, 1952 (Exhibit M-1). 2. That the other documents necessary or convenient to carry out the terms of the agreement dated February 14, 1964, do not include the proposed escrow instructions (Exhibit M-11). 3. If the conditions set forth in subparagraphs A and B of paragraph 1 above are not complied with by B. R. Morris, Dayton Realty Co., and Mutual Withdrawees, Inc., E. K. Zuckerman is not required to execute the agreement dated February 14, 1964. (Exhibit M-3). 4. Exhibits M-1 [the 1952 agreement] and M-3 [the agreement of February 14, 1964, between Morris and Dayton which Zuckerman refused to sign] are hereby attached hereto and incorporated The opinion of the arbitrators recited that the award was made with reference to the following 'statement of facts and controlling principles': (1) The February 14, 1964, agreement is a sale to Morris of property owned by him and Zuckerman as cotenants, 'subject to the equitable and legal rights of MWI, Zuckerman and Morris, under the agreement of September 18, 1952'; (2) 'Morris did not choose to acquire such interest by a partition sale or a foreclosure sale of the trust deed held by Mutual Withdrawees, Inc.'; (3) 'that on February 14, 1964, Morris and Zuckerman were bound to each other as fiduciaries by virtue of their undissolved partnership and/or their joint venture with respect to the subject property. This fiduciary relationship continued notwithstanding the dissolution and liquidation of their joint venture and/or partnership affairs. Vai vs. Bank of America, 56 Cal.2d 329, 339, [15 Cal.Rptr. 71, 364 P.2d 247]. The fact that the partnership had not been formally terminated cast upon Morris and Zuckerman the duty and obligation of good faith and full disclosure in all matters relating to the partnership affairs, and most particularly with respect to the sale to one partner of the other's interest in the partnership business. Mashon vs. Haddock, 190 Cal.App.2d 151, 166 [11 Cal.Rptr. 865]. The fiduciary status of Morris and Zuckerman remained unimpaired despite the strained relations of the partners or their disputes and quarrels about the business in which they were associated. Sime vs. Malouf, 95 C.A.2d 82, 97-98 [212 P.2d 946, 213 P.2d 788]. See Stevens vs. Marco, 147 Cal.App.2d 357, 376 [305 P.2d 669]'; (4) 'that as a co-tenant with Morris, Zuckerman was entitled to share equally the benefits and burdens of any contract entered into by Morris relating to the acquisition of any outstanding adversary claimed title, or interest in the common property. Mandeville vs. Solomon, 39 Cal. 125, 133; Stevenson vs. Boyd, 153 Cal. 630, 635 [96 P. 284, 19 L.R.A.N.S., 525]; Ferry v. McNeil, 214 Cal.App.2d 411 [29 Cal.Rptr. 577]. * * * Thus Morris is precluded from buying in the entire interest in the property for his exclusive benefit, since this would completely undermine Zuckerman's interests in the common title.'; (5) 'MWI was fully aware of Zuckerman's equitable and legal rights in the property, but gave Zuckerman no opportunity to exercise these rights in that it negotiated the contract with Morris alone and without adequate notice thereof to Zuckerman. * * * By virtue of MWI's rights, obligations, duties and responsibilities under M-1 [the 1952 agreement] MWI at all times here material occupied a status akin to that of a fiduciary to both Morris and Zuckerman, despite their default with regard to the subject property'; (6) 'Although M-3 [proposed contract of sale] is reasonable in its terms and fair as to price, it is nevertheless unfair and oppressive in its ultimate effect, since it forecloses Zuckerman from participation therein, though this is his legal right, and he has signified his willingness to accept the benefits and burdens of the agreement in a timely fashion. It is further unfair to Zuckerman in that it would require him to resort to expensive litigation to vindicate his claim of a co-interest with Morris in his transaction with MWI. Having chosen to deal with Morris, with full knowledge of Zuckerman's rights, MWI and Morris were precluded by their fiduciary status from acting in concert with each other but without affording Zuckerman the opportunities to exercise his right as a partner or co-tenant of Morris'; (7) 'To require Zuckerman to sign the contract in its present form would effectuate a forfeiture of Zuckerman's rights as a co-tenant to have the benefits of a contract executed by his partner and co-tenant unless he applied to a court of equity to sustain this right. Such forfeitures are abhorrent to both law and equity, which also deplores circuity or multiplicity of actions'; (8) 'Where property is acquired by one who stands in a fiduciary relation to others having an interest in the property or business, the mere fact that the Morris filed a motion with the arbitrators seeking the following relief alternatively: (1) Strike the condition in paragraph 1A and paragraph 3 of the award; (2) take evidence concerning the existence or nonexistence 'at any time of a joint venture or partnership between Morris and Zuckerman as to the subject matter of this arbitration'; (3) correct errors of law made by the board concerning the alleged existence of any fiduciary relationship between them after January 2, 1963; (4) strike from its opinion the statements implying the existence of a joint venture or partnership between Morris and Zuckerman after January 2, 1963; or (5) strike the entire opinion and award other than lines 2 and 3 of page 3 of the award. The motion was made on the grounds that the arbitrators acted beyond their power; the board refused to hear evidence on the nature of the relationship between Morris and Zuckerman; the board made errors of law; and the award was imperfect in form in stated particulars. The motion was accompanied by a declaration of one of the attorneys for Morris, which specified the admissible and probative evidence which would have been offered but for the rulings of the board during the hearing and which tended to prove that there was no fiduciary relationship between Morris and Zuckerman, at least as of January 2, 1963. Morris's counsel pointed out the extensive litigation pending between Morris and Zuckerman, which he believed was improperly affected by the conclusions of the board. An additional declaration by Morris was filed, likewise referring to further evidence affecting the claimed nonexistence of a fiduciary relationship between him and Zuckerman. Zuckerman filed an application on his behalf to make minor corrections in the award. Zuckerman and Morris both filed briefs in support of their own petitions and against the petitions of each other.
On November 18, 1964, the arbitrators filed a correction of the award and a supplement to the opinion. The arbitrators denied the motion for rehearing on the ground that there was no statutory authorization for the motion; they denied the alternative motion to correct the award in all the particulars requested by Morris; the minor changes in the award requested by Zuckerman were made on the face of the award. No changes of substance were made in the award. The supplement to the opinion stated in pertinent part: '1. The characterization made by the Board in its Opinion that E. K. Zuckerman and B. R. Morris are joint adventurers and that Mutual Withdrawees, Inc. occupies a status akin to that of a fiduciary pertains only to the relationship of the said parties as defined in and embodied by the Agreement of September 18, 1952, (Exhibit M-1) and applies only to the subject matter of that Agreement. 2. The status of B. R. Morris and E. K. Zuckerman as co-tenants relates only to the property which is the subject matter of the agreement of September 18, 1952, (Exhibit M-1) and arises by virtue of the transfer reflected in Exhibit M-2.'
Morris filed a petition in the superior court to vacate the award upon all the grounds specified by section 1286.2 of the Code of Civil Procedure and for a rehearing before new arbitrators pursuant to section 1286.8 of the Code of Civil Procedure, supported by declarations, designated exhibits introduced at the arbitration hearings, and the reporter's transcripts of the hearings. Since the detailed bases upon which Morris sought to vacate the award are virtually the same as the contentions Following a hearing on May 13, 1965, the court entered its orders confirming the award and denying vacation of the award. Morris moved for an order reconsidering the court's prior orders, which motion was heard on June 3, 1965, and denied on the same date.
As the court is statutorily required to do, it signed findings of fact and conclusions of law, and judgment thereon was rendered accordingly. In substance the findings of fact find as true the averments of the petition to confirm the award and find untrue the averments of the petition to vacate the award. The conclusions of law were that the arbitrators' award, as corrected, is a 'complete and final determination and adjudication of the controversy submitted by the parties to the arbitrators and is binding' upon the parties to the respective petitions and a further conclusion that Zuckerman is entitled to have the award confirmed, and the Morris petition is denied. Following entry of judment, the pending appeal was taken.
Morris contends on appeal that the trial court erred in refusing to vacate the award and in confirming the award because (1) the arbitrators did not decide whether or not Zuckerman was bound by the 1952 contract to sign the Dayton-Morris contract with MWI and other documents necessary or convenient to carry out the sale, which was the sole question submitted to them; (2) the arbitrators exceeded their powers in deciding that fiduciary relationships existed between Morris and Zuckerman and among MWI, Morris and Zuckerman and in imposing duties upon the parties based upon their finding of such fiduciary relationships; and, alternatively, (3) if issues relating to the existence and effect of fiduciary relationships among the parties were within the scope of the controversy submitted, Morris was substantially prejudiced by the arbitrators' refusal to hear evidence upon such issues.
Arbitrators' Decision Is Definite
Morris contends that the award did not decide the issue submitted to the arbitrators because the arbitrators imposed conditions upon Zuckerman's obligation to execute the Morris-Dayton agreement with MWI. We do not agree. The arbitrators answered the question submitted to them: Zuckerman is not obligated to sign the agreement unless MWI and Morris perform the conditions imposed by the arbitrators. The conditions themselves are definite and certain. An award is not invalid simply because it provides alternatives which change the result, depending upon an election of the parties, so long as the conditions imposed do not themselves exceed the scope of the arbitration agreement. (Ulene v. Murray Millman of California (1959) 175 Cal.App.2d 655, 663, 346 P.2d 494; Crofoot v. Blair Holdings Corp. (1953) 119 Cal.App.2d 156, 191, 260 P.2d 156.)
The real contention of Morris is not that the arbitrators failed to decide the issue submitted to them, but rather that the arbitrators exceeded their powers by going beyond the scope of the submission agreement. The argument is two-pronged: (1) The bases for the imposition of the conditions were findings of fact included in the opinion and the supplemental opinion of the arbitrators upon issues which were not submitted to them, and (2) the imposition of conditions, even in the form of an election, was outside the scope of the arbitrators' powers under the submission agreement.
Measure of Arbitrators' Powers
The powers of arbitrators are derived from and are measured by the parties' arbitration agreement, read with the applicable statutes. (B.S.B. Constr. co. v. Rex Constr. Co. (1962) 200 Cal.App.2d 327, 331, 19 Cal.Rptr. 167; Crofoot v. Blair Holdings Corp., supra, 119 Cal.App.2d 156, Bierlein v. Johnson
Necchi v. Necchi Sewing Machine Sales Corp. Cf. McCarroll v. Los Angeles County, etc., Carpenters B.S.B. Constr. Co. v. Rex Constr. Co.,The restricted role of the judiciary in interpreting arbitration agreements and in reviewing the action of arbitrators drawn by both the federal and California courts in collective bargaining cases does not apply to commercial arbitration cases. In labor-management disputes the court's function is confined to ascertaining whether a controversy or issue claimed arbitrable or found arbitrable by the arbitrators themselves is on its face governed by the contract. (The 'trilogy cases': United Steelworkers of America v. American Mfg. Co. (1960) 363 U.S. 564, 80 S.Ct. 1343, 4 L.E.2d 1403; United Steelworkers of America v. Warrior & Gulf Nav. Co. (1960) 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409; United Steelworkers of America v. Enterprise Wheel & Car Corp. (1960) 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424. The same principles are enunciated in Butchers' Union Local 229 v. Cudahy Packing Co. (1967) 66 Cal.2d 925, 931-932, 59 Cal.Rptr. 713, 428 P.2d 849; Posner v. Grunwald-Marx, Inc., supra, 56 Cal.2d 180-183, 14 Cal.Rptr. 297, 363 P.2d 313.) The collective bargaining cases involve substantially different concepts from those applicable to commercial arbitrations. Arbitration of labor-management disputes is a substitute for industrial strife; commercial arbitration is a substitute for litigation. (United Steelworkers of America v. Warrior & Gulf Nav. Co., supra, 363 U.S. at pp. 578-579, 80 S.Ct. 1347; Posner v. Grunwald-Marx, Inc., supra, 56 Cal.2d at pp. 176-177, 14 Cal.Rptr. 297, 363 P.2d 313.) This does not mean that commercial arbitration is the target for judicial hostility or that the most liberal intendments should not be indulged in favor of sustaining arbitration of commercial disputes. It does mean that the judiciary cannot abdicate its responsibility of subjecting both the arbitration agreement and the activities of the arbitrators to close judicial scrutiny.
In commercial arbitration cases the arbitration agreement, whether it is an agreement to arbitrate future controversies or the submission of a present controversy, must be construed by the court, applying the rules of interpretation which govern commercial contracts generally. The intention of the parties to the agreement is controlling. If the intention of the parties cannot be clearly ascertained from the four corners of the submission agreement, extrinsic aids to interpretation, including the practical construction placed upon their agreement by the parties, will be used.
This court, as was the trial court, is presented with a problem of contract interpretation. The evidence before the trial court was not essentially in conflict. Therefore, the trial court's conclusions, based upon its interpretation of the submission agreement and the award and opinions of the arbitrators, do not bind us, and we must make an independent determination of the meaning of the critical documents. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866, 44 Cal.Rptr. 767, 402 P.2d 839.) Construction of the Submission Agreement
The scope of the arbitrators' authority in this case is definded by the restrictive submission agreement dated August 7, 1964, not by the broad agreement to submit 'a future dispute' to arbitration found in paragraph 21 of the 1952 contract. The latter was the basis upon which the demand to arbitrate was initially made, but it was not the foundation for the arbitration itself. The agreement framing and submitting the existing controversy to the arbitrators, and not the agreement to resort to arbitration if a future dispute developed, is controlling.
Many of the cases relied upon by Zuckerman to support his view about the breadth of the powers of arbitrators are not controlling because each of them involves an arbitration agreement submitting 'all disputes' or 'all questions' between the parties to arbitration. E. g.: Case v. Alperson (1960) 181 Cal.App.2d 757, 5 Cal.Rptr. 635 (agreement to submit 'any dispute' to arbitration); Crofoot v. Blair Holdings Corp., supra, 119 Cal.App.2d 156, 164, 260 P.2d 156, 162 (agreement to arbitrate 'all issues existing between them and raised by any pleadings served by any of them in any of said actions * * *'). For other examples of broad arbitration agreements, see Brink v. Allegro Builders, Inc. (1962) 58 Cal.2d 577, 579, 25 Cal.Rptr. 556, 375 P.2d 436; Griffith Co. v. San Diego Col. for Women (1955) 45 Cal.2d 501, 289 P.2d 476, 47 A.L.R.2d 1349; O'Malley v. Wilshire Oil Co. (1963) 59 Cal.2d 482, 488, 30 Cal.Rptr. 452, 381 P.2d 188.
The submission agreement posed the issue for the arbitrators in deceptively simple language. It obviously imposed the duty upon the arbitrators to decide the ultimate question asked, but it also conferred authority upon them to decide those issues of fact and law which were necessary to reach the ultimate decision. Zuckerman argues that all of the facts found in the arbitrators' opinion and all of the conditions embodied in the award were matters within the submission agreement and, even if they were not within the submission agreement, Morris is estopped to complain about the arbitrators' decision of them because he invited the error. Morris argues to the contrary.
For convenience we repeat the question submitted: 'Whether Mr. E. K. Zuckerman, as one of the successors to Grandview Building Co., is required under the terms and conditions of the agreement between Mutual Housing Association, Inc., and Grandview Building Co., dated September 18, 1952, to execute that certain proposed agreement of sale and set forth in a document dated February 14, 1964, entitled 'Agreement of Sale' and other documents necessary or convenient to earry out its terms.'
Stove Mounters' Internat. Union, ete. v. Rheem Manufacturing Co. (1959) 168 Cal.App.2d 690, 695, 336 P.2d 181; Bierlein v. Johnson, supra, 73 Cal.App.2d at p. 733, 166 P.2d 644.
The submission agreement is not self-explanatory. To assist us in interpreting it, we first turn to the practical construction placed upon it by the parties to the arbitration.
The contentions of fact and law submitted by Zuckerman and MWI at the outset of the arbitration are all directed to a construction of the 1952 agreement. None of them referred to the relationship of Morris and Zuckerman or to the rights of one against the other in the event that Zuckerman should be compelled to execute the proposed agreement.
At the outset of the arbitration Zuckerman filed a lawsuit against Morris to impress a constructive trust upon the Brentwood property in Morris's hands in the event Zuckerman was ordered by the arbitrators to sign the agreement. A copy of the complaint was marked for identification in the arbitration proceeding. Zuckerman objected to its admission. The arbitrators never ruled upon the objection and the document was not received in evidence, although it was frequently mentioned during the arbitration. The scope of the submission agreement was the subject of many discussions between the arbitrators and counsel for the respective parties throughout the arbitration. Again and again the parties and the arbitrators agreed (1) the disposition of the proceeds of sale was not within the submission agreement; (2) the relationship between Zuckerman and Morris, fiduciary or not, was outside the scope of the submission.
Typical is the comment by the chairman in discussing the admissibility of evidence offered by Morris to refure Zuckerman's claim that he was entitled to receive notice of Morris's impending offer to purchase under the terms of the 1952 agreement: 'Actually, I think you are addressing yourself more to the question which will confront the court that ultimately tries the lawsuit embodied in M-5, whether or not there was a sufficient oral agreement between the parties to raise a relationship of trust with respect to the acquisition of a particular piece of property.
'Arbitrator: After the property is put up for sale and the price, whatever it means, is set, what more are we, as arbitrators, now concerned with? You don't say that we are concerned with the disposition of the proceeds, do you? Mr. Riordan [attorney for Zuckerman]: No, sir.' '[By the chairman]: As between Mr. Zuckerman and Mr. Morris, they have other rights that flow out of their particular relationship. We are not terribly concerned with that at this time, because we are not the tribunal to decide that.'
'[By the arbitrator]: Now, is it not really the problem of the relationship which Mr. Zuckerman and Mr. Morris have to resolve between themselves subsequently as to whether or not Mr. Morris has failed in some sort of duty in the determination of their relationship, which is beyond us? * * * Mr. Riordan: Yes, sir. Arbitrator: That problem is not before us, is it, Mr. Riordan? Mr. Riordan: No, sir. Arbitrator: And I do not have to concern myself on the parties' agreeing with whatever arrangements they have? Mr. Riordan: No, sir. * * *' '[By Mr. Riordan]: Our dispute is with MWI at this time. Even though they are both proponents, we are claiming fthat MWI, as the security holder, which is really the primary proponent in this proceeding, has not done right by us and actually, not that Mr. Morris, as the joint venturer has not done right by us. Which is the matter of the lawsuit.' '[Mr. Riordan]: Let us say that Mr. Zuckerman was contrary to his fiduciary duties to Mr. Morris, and again, this is arguendo of trying to buy the property out from underneath him. This is between Mr. Zuckerman and Mr. Morris. This would be, of course, I assume, a good defense in the lawsuit. I claim it is no defense whatsoever to MWI's attempred action here to compel Mr. Zuckerman to sign an agreement. * * * I believe this whole comflict that is now going back and forth in this direction is not the issue in this proceeding * * * [We] want to make it clear that we are not here to fight Morris-Zuckerman battle or their breach or mutual breaches of fiduciary duty, running in the direction between the two of Morris and Zuckerman. Our concern is the 1952 agreement, the implied duties owties owed by MWI under that agreement to Grandview and to its successors, be they happy people together, or be they people in the midst of a dog fight. The chairman: Well, let me assure you, certainly, that the arbitrators do not intend to intrude on that realm of the situation, because we certainly are going to try to discipline ourselves to keep within the framework of the submission agreement and the issues properly before us. * * *'
Zuckerman argues that Morris himself injected those issues into the arbitration and that he is thereby foreclosed from urging that they were not before the arbitrators. The pages of the transcript heard from an informant, a parole officer,
A fair reading of the entire transcript of the hearing before the arbitrators discloses that neither the parties nor the arbitrators construed the submission agreement at that time as including any issue about the existence or the legal effect of a fiduciary relationship between Zuckerman and Morris or between MWI, Zuckerman and Morris, or as including the disposition of the proceeds of sale between Zuckerman and Morris.
The fiduciary relationship concept was injected by Zuckerman in his briefs for the arbitrators after the conclusion of the hearing, to support his contention that MWI could not specifically enforce the 1952 agreement. Into that argument was woven a theory that the joint venture between Grandview and MWI, the existence of which in 1952 was undisputed, continued after Grandview defaulted and after Grandview dissolved, and by reason of the continuance of the joint venture, fiduciary duties were imposed upon MWI in favor of Zuckerman as a successor to Grandview. Having thus become a retroactive joint venturer with MWI, Zuckerman argued that he was entitled to participate in Zuckerman further contends that the arbitrators did not exceed their power in imposing the conditions in the award because the submitted controversy necessarily included the challenged issues, and the arbitrators did no more than apply appropriate equitable principles. We disagree. In asking the arbitrators to decide whether Zuckerman had to sign the agreement of sale, the parties were asking for relief which, if asked of a court, would be characterized as specific performance of the 1952 contract. In deciding the ultimate issue thus submitted, the arbitrators could properly apply both legal and equitable principles. (Sapp v. Barenfeld (1949) 34 Cal.2d 515, 523, 212 P.2d 233.) The unquestioned right of the arbitrators to base their decisions upon broad principles of justice and equity does not mean that arbitrators have all of the powers of a chancellor or that arbitration proceedings have the dimensions of a suit in equity. The parties themselves chart the outer limits of the arbitrators' jurisdiction by their arbitration agreement. One of the advantages of arbitration is that the parties are free to submit or to withhold the submission of issues as they please. Litigation does not present a similar opportunity. Parties cannot conduct litigation piecemeal or split causes of action into several lawsuits. Once the parties have invoked the jurisdiction of a court of equity to resolve a controversy between them, all of the issues which, according to controlling substantive law, are relevant to that controversy are deemed to have been submitted for decision, and even if one or more of such issues has not been actually litigated, relitigation between the same parties to the same controversy is thereafter foreclosed by the doctrine of bar. In arbitration proceedings the parties can shape as narrow an issue as they like. Were arbitrators permitted to expand the controversy submitted to encompass matters deliberately withheld from arbitration, the utility of commercial arbitration would be seriously impaired. Few people would want to take the risk of submitting a controversy to arbitration.
The controversy submitted did not include the specific enforceability of any agreement among the parties other than the 1952 contract. The question was not whether the 1964 sales agreement was specifically enforceable. Zuckerman's duty to sign the 1964 agreement depended upon enforcement of the 1952 contract. The inquiry into the specific enforceability of the 1952 contract did not depend upon the specific enforceability of the 1964 agreement nor upon the relationships of Morris and Zuckerman to each other, nor upon the distribution of the proceeds of any sale as between Morris and Zuckerman. The specific enforceability of the 1952 contract depended upon the terms of that contract and upon the conditions which existed when that contract was executed. (O'Connell v. Lampe (1929) 206 Cal. 282, 285, 274 P. 336; see Gosnell v. Lloyd (1932) 215 Cal. 244, 254-255, 10 P.2d 45.) We conclude that the findings of the arbitrators on the challenged issues and the conditions of the award which reflect those findings were not implicitly embraced within the issue submitted to the arbitrators.
Finally, Zuckerman contends that Morris cannot complain about the arbitrators' decision of unsubmitted issues because Morris did not thereby suffer any prejudice. The existence or nonexistence of prejudice is irrelevant. The decision of issues which were not submitted to the arbitrators William B. Logan & Associates v. Monogram Precision Industries
The award cannot be 'corrected without affecting the merits of the decision upon the controversy submitted.' (Code Civ.Proc., § 1286.2, subd. (d).) The conditions are an integral part of the award, and they cannot be stricken without destroying the award itself.
In view of our disposition of the central issues on the appeal, it is unnecessary to discuss the other contentions of the parties.
The judgment is reversed.
STEPHENS, J., and AISO, J. pro tem. , concur.
Assigned by Chairman of the Judicial Council.
'I think that is not the problem that confronts us here. For example, even if the Board should find that Mr. Zuckerman is required to execute the agreement of February 14, 1964, that in no sense would prejudge, if he signed that agreement, whether or not the purchaser of that property is not bound by some principle of constructive trust. It only means that he is required to sign the agreement and it properly passes to the purchaser, but whether or not, despite that passage, Mr. Zuckerman may have an equitable interest in that property by virtue of the application of principals of fiduciaries obtaining advantages and all the other problems which arise out of that, would not be a matter for this tribunal to determine, because certainly, those matters are not before us for resolution.
'And actually, this is the thrust, I think, of the questions that you are asking here, which I think would be very pertinent in the right lawsuit, but I am wondering if we are asking those questions in the wrong forum.'