Opinion
B160239.
7-17-2003
SHEEHY ROAD WATER SYSTEMS SUBSCRIBERS, Respondents, v. JOHN PIRGHAIBI AND SANDRA PIRGHAIBI, Appellants.
Law Offices of Tyron J . Sheppard, Tyron J. Sheppard, for Appellants. John F. Hodges, for Respondents.
John and Sandra Pirghaibi appeal from the judgment entered confirming an arbitration award in favor of respondents, the Sheehy Road Water Systems Subscribers, an unincorporated association (the water system), and its subscribers other than the Pirghaibis. They contend the arbitration award grants a remedy not authorized by law, that it was procured by "undue means" because respondents counsel had a conflict of interest and should have been disqualified, and that the judgment improperly changes the language of the award and includes an additional party. We affirm.
Facts
The Pirghaibis own a house in a Nipomo subdivision. Their home, together with seven other lots in the subdivision, is serviced by a private water system pursuant to the Sheehy Road Water System Agreement. The Pirghaibis became involved in disputes with the other water system subscribers. The water system agreement provides: "Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment on the award rendered may be entered in any court having jurisdiction." As a result, the other subscribers retained counsel and submitted a demand for arbitration of the disputes to the American Arbitration Association (AAA).
Seven couples are members of the water system; one couple owns a double-sized lot and thus has two shares in the system.
The arbitrator issued an opinion and interim award against the Pirghaibis. Among other things, the award explained the quorum and majority voting terms of the agreement and ruled that the Pirghaibis owed $ 460.67 to the systems general fund for water use and $ 573.07 to the system for unpaid power usage costs.
After the interim award was issued, the Pirghaibis objected that their opposing counsel, John Hodges, should have been disqualified because he had a conflict of interest. According to the Pirghaibis, because Hodges represented the water system, he also represented the subscribers to it, including the Pirghaibis, and therefore could not represent an interest adverse to them in the arbitration. They also claimed that Hodges acquired confidential information about them because he read letters they wrote to the water system. Hodges responded that he had never represented the Pirghaibis, who had always been in an adversarial relationship with his clients, the water system and its other subscribers. The arbitrator found that Hodges had never represented the Pirghaibis, had no conflict of interest and could not be disqualified. In his final opinion and award, the arbitrator ordered the Pirghaibis to pay respondents attorney fees of $ 12,971.40 and a share of the costs of the arbitration proceeding.
The water system and its other subscribers filed a petition to confirm the final arbitration award. The Pirghaibis moved to vacate it on the ground that Hodges should have been disqualified. In a reply brief, they also contended that the petition to confirm the award had not been filed by the real party in interest — the water system. These arguments were rejected by the trial court and the arbitration award was confirmed.
Discussion
Real Parties In Interest
The Pirghaibis first contend that the trial court erred when it entered judgment in favor of the other water system subscribers rather than the water system as an entity. They claim the other subscribers are not the real party in interest and therefore lacked standing to oppose the motion to vacate the arbitration award. (Code Civ. Proc., § 367 ("Every action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.").) The water systems failure to oppose the same motion should, the Pirghaibis contend, be "considered an admission that the request to vacate the award was meritorious . . . ." The argument is without merit.
All statutory references are to the Code of Civil Procedure unless otherwise stated.
We need not decide whether the water system is the only real party in interest or whether section 367 even applies to a petition to confirm an arbitration award. Assuming both issues are resolved favorably to the Pirghaibis, the trial court did not err because judgment was entered in favor of the water system. Moreover, because the water system and all of its subscribers were parties to the arbitration and to the confirmation petition, the substantive basis for the real party in interest rule has been served. The Pirghaibis will not face a multiplicity of suits and will be protected "from the harassment, vexation, and expense of having to meet several lawsuits from different claimants involving the same claim or demand; and to insure that such defendants will be protected from further annoyance or loss in the future once a judgment is entered . . . ." (Saks v. Damon Raike & Co. (1992) 7 Cal.App.4th 419, 432.) Finally, we note that the motion to vacate the arbitration award lacked merit for the reasons stated below. As a result, the trial court had discretion to deny it even in the absence of any opposition from the water system. There was no error.
Villinger/Nicholls Development Co. v. Meleyco (1995) 31 Cal.App.4th 321, 326-327, held that, because a petition to confirm arbitration award is a special proceeding, not an "action," it would not support an attorney fee award under Civil Code section 3176 which awards attorney fees to the prevailing party in an action to enforce payment of a claim stated in a bonded stop notice. Section 367 similarly applies to an "action," and not to a special proceeding such as the one at issue here.
This issue was presented to the arbitrator. After reviewing the parties extensive briefs, the arbitrator concluded that Hodges had never represented the Pirghaibis and could not be disqualified. (See, e.g., Responsible Citizens v. Superior Court (1993) 16 Cal.App.4th 1717, 1728-1729.)
Attorney Disqualification
The Pirghaibis second contention is that the trial court erred when it failed to review de novo the question of whether their opposing counsel, Mr. Hodges, ought to have been disqualified from participating in the arbitration based upon a conflict of interest. They contend the arbitration award ought to have been vacated because it was procured by "undue means," within the meaning of section 1286.2, subdivision (a)(1) — e.g., Hodges conflict of interest. The conflict arose, they assert, when Hodges was retained as counsel for the water system of which they are members, and for a homeowners association of which they are also members. Hodges never represented the Pirghaibis individually and, when he was retained, their dispute with their neighbors had already begun. The trial court adopted the same reasoning in denying the motion to vacate the arbitration award. It also found no evidence that the award was procured through "undue means" within the meaning of section 1286.2. Relying on A.G. Edwards & Sons, Inc. v. McCollough (9th Cir. 1992) 967 F.2d 1401, the trial court concluded that the term "undue means" refers to "behavior that is immoral, if not illegal, something wrong, according to the standards of morals which the law enforces. Furthermore, it must be shown that undue means were not discoverable before the award was made and caused the award to be made." Here, the asserted conflict was not hidden but was instead brought to the arbitrators attention and there was no evidence that it contributed to the final award. As a result, the trial court concluded, the Pirghaibis had failed to show the award was procured by undue means. We agree.
All of the homeowners in the subdivision are members of the Highland Hills Homeowners Association. Only seven of those homeowners are subscribers to the water system.
"In reviewing a judgment confirming an arbitration award, we must accept the trial courts findings of fact if substantial evidence supports them, and we must draw every reasonable inference to support the award. (Pierotti v. Torian (2000) 81 Cal.App.4th 17, 24 .)" (Alexander v. Blue Cross of California (2001) 88 Cal.App.4th 1082, 1087.) We defer to the trial courts decision on a motion to disqualify counsel, absent an abuse of discretion. (Toyota Motor Sales, U.S.A., Inc. v. Superior Court (1996) 46 Cal.App.4th 778, 782.) "In deciding whether the trial court abused its discretion, `we are . . . bound . . . by the substantial evidence rule. [Citations.] . . . . We presume the court found in [the prevailing partys] favor on all disputed factual issues." (Strasbourger Pearson Tulcin Wolff Inc. v. Wiz Technology, Inc. (1999) 69 Cal.App.4th 1399, 1403.)
Our review of the arbitrators underlying findings is even more circumscribed. As the courts of this state have repeatedly emphasized, the merits of a controversy that has been submitted to arbitration are not subject to judicial review. This means that we may not review the validity of the arbitrators reasoning, the sufficiency of the evidence supporting the award, or any errors of fact or law that may be included in the award. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11, 832 P.2d 899; see also Marsch v. Williams (1994) 23 Cal.App.4th 238, 243-244.) Judicial review is severely limited because that result "vindicates the intentions of the parties that the award be final, and because an arbitrator is not ordinarily constrained to decide according to the rule of law . . . ." (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 11 .)
The trial court did not err in denying the motion to vacate. First, substantial evidence supports its factual finding that the arbitration award was not procured through any undue means. As the Ninth Circuit held in construing an analogous federal arbitration statute, the term "undue means" has no precise definition but "it clearly connotes behavior that is immoral if not illegal." (A.G. Edwards & Sons, Inc. v. McCollough, supra, 967 F.2d at p. 1403.) The party seeking to vacate an arbitration award on this ground bears the burden to prove that those means could not have been discovered with the exercise of due diligence prior to the arbitration. (Id. at p. 1404.) Where the undue means "is not only discoverable, but discovered and brought to the attention of the arbitrators, a disappointed party will not be given a second bite at the apple." (Id.)
We decline to give the Pirghaibis a second bite at the apple. All of the parties to this arbitration, and the arbitrator, were fully informed of the facts concerning Hodges representation of his clients, the Pirghaibis membership in the water system and the homeowners association, and their adversarial relationship with both entities. The Pirghaibis had a full and fair opportunity to arbitrate the conflict issue. They did not prevail. "Undue means" did not influence that outcome.
Second, the trial court did not abuse its discretion when it refused to disqualify Hodges as counsel for the water system and its other subscribers. Again, substantial evidence supports the trial courts implied findings that Hodges never represented, and never obtained confidential information about the Pirghaibis. By the time Hodges was retained, the water system and its other subscribers were involved in an adversarial relationship with the Pirghaibis. His representation of the homeowners association occurred under the same circumstances. These facts provide substantial evidentiary support for the trial courts finding that Hodges representation of the water system and some of its individual subscribers did not amount to representation of the Pirghaibis. (Responsible Citizens v. Superior Court, supra, 16 Cal.App.4th at pp. 1732-1733.)
Form of Judgment
The Pirghaibis final complaint is that the judgment "exceeds the scope" of the arbitration award because it includes the water system, rather than only the individual subscribers, and because it omits one paragraph of the award. The first contention is without merit because, as we previously explained, the water system is a proper party to the judgment. The second contention fails because the paragraph at issue consists of an example or illustration of a ruling made in an earlier paragraph that is included in the judgment. The Pirghaibis are in no way prejudiced by this omission.
Motion for Sanctions on Appeal
Respondents request that we impose sanctions for an appeal which, they contend, is frivolous and has been pursued solely for purposes of delay. (Code Civ. Proc., § 907.) While we concede this appeal is, at best, a hairs breadth away from frivolousness, we deny the motion for sanctions. "Appellate sanctions are imposed to discourage frivolous appeals and to compensate for losses caused by such an appeal. (In re Marriage of Economou (1990) 223 Cal. App. 3d 97, 107, 272 Cal. Rptr. 673.) One generally accepted measure of that loss is the amount of attorneys fees incurred by respondent in opposing the appeal." (Harris v. Sandro (2002) 96 Cal.App.4th 1310, 1316.)
Here, the water system agreement provides: "If a dispute arises over the performance of any of the terms of this Agreement, . . . the prevailing party in any said proceeding shall be entitled to all costs and reasonable attorneys fees incurred, as may be fixed by the Court." The judgment awards respondents arbitration costs of $ 5,755 and attorneys fees of $ 12,971.40. Respondents are also entitled to recover their costs and attorneys fees incurred on the petition to confirm the arbitration award, and on appeal. This sizeable sum should be sufficient to discourage the Pirghaibis from further unnecessary litigation. Accordingly, we can see no useful purpose that would be served by an additional award of sanctions.
Conclusion
The judgment is affirmed. Respondents are awarded their costs on appeal. In addition, they are awarded attorney fees on appeal, in an amount to be determined on noticed motion in the trial court.
We concur: GILBERT, P.J., and PERREN, J.